November 6, 2007

Dems combine Mil Con-VA and Labor-HHS; Senate R's to Invoke Rule 28

House Ways and Means Approves AMT Patch, Extenders  

Revised SCHIP Passes Senate, Leadership Seeking More GOP Votes

Farm Bill: Ag Comm. adds $1b for Nutrition, Expects Long Debate

Budget Process Step-By-Step™

Note: Federal Government agencies are currently operating under a continuing resolution (H.J. Res. 52) allowing Federal programs, projects, and activities to continue operating at FY 2007 spending levels through November 16.

This Week:

Monday 11/5: Speaking at the National Press Club, House Appropriations Chairman Obey urged the President to compromise on appropriations (Obey Statement)

Senate began consideration of the Farm Bill (H.R. 2419).

Tuesday 11/6: House will vote on the Labor-HHS-Education Appropriations Conference Report (H.R. 3043) which now also includes the provisions of Mil Con-VA (H.R. 2642).

House to vote on overriding the President's veto of Water Resources Development Act of 2007 (H.R. 1495). (President's VETO statement)

Later in the week: House will begin consideration of the AMT/Extenders Bill (H.R. 3996).

Defense Appropriations Conference Meeting (Closed)

SCHIP Negotiators continue to meet with House Republicans

Last Week:

Wednesday 10/31: The President signed a seven-year extension of the Internet tax moratorium (H.R. 3678).

Senate Budget Committee held a hearing on the “Bipartisan Entitlement Commission.” The Committee heard testimony from several witnesses, including House Majority Leader Steny Hoyer and GAO Comptroller General David Walker (Committee Release)

Senate passed the revised SCHIP bill (H.R. 3963) by a vote of 64-30.

Dems Combine Mil Con-VA, Labor-HHS; Senate R's to Invoke Rule 28

Last week Democratic congressional leaders added the Military Construction-VA (HR 2642) bill to the Labor-HHS-Education (HR 3043) conference report, in a move to leverage passage of the Labor-HHS measure which would provide nearly $10 billion more than the President requested. The Administration has threatened to veto the Labor-HHS bill. (Conference Report Summary)

[Context: The new ethics and lobbying law, P.L. 110-81, amended Senate Rule 28 to allow Senators to “surgically strike” from conference reports items that were outside the scope of conference, i.e., not in either the House-passed or Senate-passed bills. If the new Rule 28 point of order is raised, the provisions outside the scope of conference are automatically stricken from the conference report, unless 60 Senators vote to waive the point of order.]

In this particular scenario, Democrats have added the Mil Con-VA Appropriations bill provisions to the Labor-HHS-Education conference report, rendering the Mil Con-VA provisions subject to a Rule 28 objection. Last week, 44 Republican Senators signed a letter objecting to adding either Defense or Mil Con-VA to the Labor-HHS bill, making a 60-vote waiver of Rule 28 highly unlikely.

Consequently, the sequence will likely be:

--House passes Labor-HHS conference report, including the MilCon-VA provisions, on Tuesday
--Later in the week, the Senate takes up the package
--Senate Republicans make a Rule 28 point of order against the Mil Con-VA provisions in the Labor-HHS conference report
--Democrats fail to get 60 votes to waive the point of order
--The Mil Con-VA provisions are stricken from the Labor-HHS-Education conference report
--The Labor-HHS Education measure ceases to be a conference report, and is returned to the House
-- Speculation: Congress may then take up and pass a free-standing Mil Con-VA conference report, although the President has objected to spending levels in the Mil Con-VA bill ($4 billion over the President's request).

[Context: Congressional Democrats and the President are currently locked in a face-off over appropriations levels, with Congress' Budget Resolution calling for $23 billion more in non-defense discretionary spending than the President's FY 2008 Budget request. The President has threatened to veto 9 of 12 appropriations bills. The current Continuing Resolution, which is keeping Federal agencies open in the absence of FY 2008 funding, expires next Friday, November 16.]

House Ways and Means Comm Marks Up AMT Patch, Extenders

Last Thursday, November 1, the House Ways and Means Committee approved H.R. 3996, a $77 billion tax package that includes a one-year Alternative Minimum Tax (AMT) “patch,” as well as numerous “extenders” for expiring tax provisions. (Bill Summary) The bill was approved in a party-line vote after Republicans objected to the bill's offsets.

The AMT patch would cost $51 billion and the extenders $21 billion. The bill also includes $4 billion to expand the child credit and increase the standard deduction. The bill has generated controversy over its offsets, in particular, $24 billion from taxing deferred compensation, and $26 billion from taxing carried interest as ordinary income (instead of capital gains). (JCT explanation of provisions)

Congress must act on AMT quickly due to deadlines for printing 2007 tax forms. Last Wednesday, October 31, leaders from congressional tax writing committees sent a letter to the IRS promising “imminent changes” to the AMT and encouraging the IRS to prepare 2007 tax forms with the assumption that the AMT patch is approved. The House will consider H.R. 3996 this week.

[Context -- Ongoing controversy over PAYGO: House Ways and Means Committee Chairman Charles Rangel (D-NY) is committed to maintaining PAYGO rules for a revenue-neutral tax package. (Rangel Release) Congressional Republicans, however, have called for patching the AMT without offsets. (Ranking Member McCrery Release) In the Senate, the debate over waiving PAYGO is not so clear. While Senate Finance Committee Chairman Max Baucus (D-MT) fully supports patching the AMT and providing extenders, he has remained relatively quiet on the issue of offsets. (Baucus Statement) Ranking Member Chuck Grassely sent a letter to the chairman calling for a package without offsets and claiming to speak for a majority on the Senate Finance Committee.]

[Context on AMT: The AMT was enacted in 1969 to preclude very wealthy individuals from escaping all tax liability due to tax loopholes. It operates as an alternative calculation of income tax liability which cancels out various deductions, exclusions, and tax preferences. Taxpayers are required to pay the higher of AMT tax liability and regular income tax liability. However, upper-middle and middle-income taxpayers are increasingly finding themselves subject to the AMT-- for two reasons. First, while the regular income tax is indexed for inflation, the AMT is not. Second , recent income tax rate reductions have narrowed the differences between regular and AMT tax liabilities. The Treasury Department now projects that the number of taxpayers subject to the AMT in 2007 will jump from 4 million to 25 million without enactment of a one-year patch. (Treasury Statement)]

Revised SCHIP Passes Senate, Leadership Seeking More GOP House Votes

Following House action earlier in the week, last Thursday, November 1, the Senate passed a revised SCHIP bill (H.R. 3963) by a vote of 64-30. (Revised CBO Cost Estimate) The revised bill includes several revisions aimed at attracting additional Republican votes in order to secure a veto proof supermajority in the House:

--capping eligibility at 300 percent of the Federal Poverty Level (FPL);
--strengthening language to prevent illegal immigrants from receiving benefits; and
--including language to accelerate phasing out childless adults from receiving benefits.

The revised provisions, however, have not attracted the votes needed to reach a 2/3 majority in the House. Congressional leaders have delayed enrolling the bill to gain time to find a compromise that might win over House Republicans. Senate Finance Committee Chairman Max Baucus (D-MT) made a statement insisting an agreement was within reach and requesting more time. The Administration remains committed to its plan to cap SCHIP eligibility at 200 percent of the Federal Poverty Level (a reduction from current levels in many States) and has promised to veto the revised bill. (October 31 Statement of Administration Policy)

[Context: 19 States-- with Administration approval-- currently cover children in families earning more than 200 percent above the FPL (ranging from West VA at 220 percent to New Jersey at 350 percent of FPL). The rationale for the flexibility of current law is that in New Jersey , for example, a family of four with two working parents earning 300 percent of the poverty level ($61,950) is unlikely to find affordable health insurance.]

Farm Bill: Ag Comm. adds $1b for Nutrition, Expects Long Debate

This week the Senate begins the long awaited debate on the multiyear Farm Bill (HR 2419) . The Senate Agriculture Committee unanimously approved the $238 billion bill in a voice vote on October 25. However, the Committee avoided many of the bill's controversial provisions, leaving them to be addressed during Floor action. (Farm Bill Final Summary)

Most notably, the bill is expected to face opposition to a $5 billion provision establishing a disaster relief fund. The fund was a key provision in S. 2242, an Agriculture Tax Package approved earlier by the Senate Finance Committee. In addition to the disaster relief fund, S. 2242 includes $7.5 billion for conservation provisions and another $2 billion for energy tax credits and incentives. The package offsets the new Farm provisions through new tariff revenues and codifying the “economic substance doctrine,” relating to business tax shelters.

One of the more controversial provisions in the farm bill is Chairman Harkin's Average Crop Revenue (ACR) program. The ACR is an optional program that would tie counter-cyclical farmer relief payments to state crop revenues. In the past, relief payments have been based on national crop prices, which often misrepresented parts of the country and local markets. The new program offers a farmers choice: opt for the crop revenue-based payment or continue with the pre-existing price-based system.

After passing an amendment sponsored by Sen. Pat Roberts (R-KS) last week, the CBO estimates that the ACR would save up to $5.3 billion over 5 years. The additional savings from Roberts amendment have been used to boost nutrition funding by $1 billion. (Harkin Release)

Several Senators are also considering amendments and alternative programs likely to inspire debate. Senator Dianne Feinstein (D-CA) may move to attach S. 237, which would extend citizenship rights to certain migrant workers. Republican Senators Frank Lautenberg (D-NJ) and Richard Lugar (R-IN) hope to reform the bill by removing “depression era” farm subsidies and replacing them with a more robust crop insurance program. (Lautenberg-Lugar Release)

CBO Cost Estimate
CRS Report: Crop Insurance and Disaster Assistance: 2007 Farm Bill Issues

[Context: The "Farm Bill," renewed every 5 to 6 years, governs the key aspects of Federal farm policy. Many provisions of the current Farm Bill, enacted in 2002, expired this year. The 2002 bill covers a wide range of programs. Those with the greatest budget impact are (1) Food Stamps; (2) Commodity Support programs (government subsidies to producers of certain farm commodities--primarily corn, cotton, wheat, rice, and soybeans--intended to stabilize farm income); (3) Agricultural Conservation programs (payments and incentives addressing environmental concerns, soil erosion and water supplies); and (4) Export promotion programs.]

Pending Appropriations

Obey Urges President to Compromise on Spending

Agriculture/HR 3161: House bill $982 million over President's request; Senate-reported bill $874 million over President's request; White House threatened a veto on July 31. House Summary Senate Summary

[Conference Issues: House bill includes provision allowing individuals and pharmacies to import prescription drugs from Canada and other countries.]

Commerce-Justice-Science/HR 3093: House bill $2.31 billion over President's request; Senate bill $4.2 billion over President's request; White House has threatened to veto the House and Senate bills. Conference may begin as early as this week. House Summary Senate Summary

Defense/HR 3222: House bill $3.29 billion under President's request; Senate base bill (excluding emergency border security) $3.58 billion under President's request. No veto threat. House and Senate began conferencing last week. House Summary Senate Summary

[Conference Issues: House bill includes language restricting torture and permanent bases in Iraq, provides $2.8 billion more for transport ship and Stryker vehicles, and would appropriate additional $270 million for satellites and GPS programs. Senate bill includes nearly $3.8 billion in emergency spending for border security, and provides additional $500 million for military health care programs.]

Energy-Water/HR 2641: House bill $1.13 billion over President's request; Senate-reported bill $800 million over President's request; White House threatened a veto on June 13. House Summary Senate Summary

[Conference Issues: Senate bill provides additional $760 million for National Nuclear Security Administration. House bill provides $200 million more for renewable energy programs.]

Financial Services/HR 2829: House bill $244 million under President's request; Senate-reported bill $122 million over President's request; White House threatened a veto on June 26 because of provisions that would “weaken current [trade] restrictions against Cuba .” House Summary Senate Summary

Homeland Security/HR 2638: House bill $2.06 billion over President's request; Senate bill $5.25 billion over President's request; White House has threatened to veto the House and Senate bills. House Summary Senate Summary

[Conference Issues: House bill provides over $200 million more for FEMA. Senate added $3 billion of emergency funding for border security.]

Interior-Environment/HR 2643: House bill $1.95 billion over President's request; Senate-reported bill $1.498 billion over President's request; White House threatened a veto on June 25. House Summary Senate Summary

[Conference Issues: House bill appropriates $300 million more for the EPA, mostly in the form of state assistance grants.]

Labor-HHS-Education/HR 3043: Conference report $9.8 billion over the President's request; White House has; White House has threatened to veto the House and Senate bills. Conference Report

[Conference Issues: The House bill includes additional $500 million for low-income home energy assistance (LIHEAP) and $500 million more for grants to low income schools. The Senate would provide an additional $250 million for NIH. Senate Floor amendments include additional $150 million for Social Security.]

Legislative Branch/HR 2771: House bill $3.1 billion; Senate-reported bill $2.8 billion; President requested $4.33 billion (combined), White House has not threatened a veto. [Context: The House and Senate do not consider the spending of the other chamber until conference.] House Summary Senate Summary

MilCon-VA/HR 2642:The President and Congressional Republicans strongly oppose adding the provisions of Mil Con-VA bill to the Labor-HHS-Education Conference Report. The Mil Con-VA bill is $4 billion over President's request; White House has not threatened a veto but insists on offsets in other spending bills. Conference Report

[Conference Issues: The House bill would provide $196 million more than the Senate for medical programs; the Senate bill would provide $177 million more than the House for base construction and closings. The Senate bill also includes $100 million in emergency funds for security at 2008 political conventions.]

State-Foreign Ops/HR 2764: House bill $700 million under President's request; Senate bill $720 million under President's request; White House has threatened to veto the House and Senate bills. [Context: Despite coming in under the President's request, both bills face veto threats because of language that would overturn a policy barring U.S. funding for any international organization that performs abortions overseas.] House Summary Senate Summary

[Conference Issues: House bill provides $600 million more than the Senate for the Millennium Challenge Corporation, which provides competitive grants to nations engaged in democratic reforms.]

Transportation-HUD/HR 3074: House bill $2.77 billion over President's request; Senate bill $3.1 billion over President's request; White House has threatened to veto the House and Senate bills. Conference may begin as early as this week. House Summary Senate Summary

[Conference Issues: The House would provide $228 million more than the Senate for Community Development Block Grants. The Senate bill includes an additional $1 billion for bridge repair and maintenance.]

New Budget Docs

CBO: Long-Term Unemployment