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Category: On the Hill

WELCOME 113TH CONGRESS

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The 113th Congress will be sworn in at noon today but will take no break from fighting over fiscal priorities with the opening weeks and months likely to be dominated by partisan fights over the size of a multibillion-dollar disaster aid package (Super Storm Sandy relief package), how to raise the nation’s debt ceiling before the end of February, and calls for additional spending cuts and an overhaul of the federal tax code.  President Obama has also called for legislative action on gun control and immigration, two issues that are sure to create more partisan division rather than unity.

Congress approved a fiscal cliff compromise on New Year’s Day, which the President signed late last night using an autopen (he is still on vacation with his family in Hawaii).  That legislation postpones the across-the-board spending cuts mandated by last year’s Budget Control Act (sequestration) for two months until March 1st, right around the time when Treasury will brush up against the debt ceiling. Additionally, the latest continuing resolution (CR) to fund the government expires on March 27th.

Republicans hope to seize on all these deadlines to win additional spending reductions and/or changes to entitlement programs, but the debt ceiling is likely to be their best leverage against Democrats who have promised to hold firm in opposition.

Fiscal Cliff Averted

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Early this morning, the Senate rang in the New Year by approving legislation to avert the economic impacts of the fiscal cliff. The bipartisan agreement makes changes to tax policy by allowing for the first income tax rate increase in nearly two decades and also delays the sequester by offering $24 billion in other spending reductions.  The House is scheduled to take up the legislation at noon today. Conservative opposition in the House has thwarted earlier fiscal cliff proposals and Republicans will likely need the support of Democrats to clear the legislation. Democratic leaders said late Monday they were still reviewing the bill, but with the White House backing it, Democrats seemed likely to favor it.

The deal agreed to in the Senate would permanently extend the 2001 and 2003 tax rates for ordinary income, capital gains, and dividends for individuals with annual incomes below $400,000 and couples with incomes below $450,000. It would preserve the current estate tax exemption and permanently prevent the alternative minimum tax (AMT) from imposing higher taxes on middle-income Americans. The agreement also retroactively renews a package of one- or two-year reauthorizations of tax extenders, including the R&D tax credit.

As for spending, the measure would delay the sequester for two months — until the beginning of March — and cover the $24 billion cost with a combination of new revenue and alternative spending cuts over a 10-year period.  The plan calls for reducing the FY2013 and FY2014 discretionary spending caps determined in the 2011 Budget Control Act (PL 112-25) by $12 billion. The spending cuts would be evenly divided between defense and non-defense spending. Another $12 billion would be new revenue generated by making it easier for owners of some tax-deferred retirement plans to switch to Roth IRAs. The two-month sequester delay is designed to give Congress more time to figure out a substitute for across-the-board cuts, which would slice $55 billion from defense, about $39 billion from domestic discretionary spending, and $16 billion from mandatory spending programs during the remaining nine months of FY2013.

While it is good that Congress is finally taking action on tax issues and averting the worse parts of the sequester, they have set themselves up for another fiscal fight in the early months of the 113th Congress. The nation will bump up against another debt ceiling limit in February and Congress will need to take legislative action at that time to increase the limit. This will certainly be another fight on reducing federal spending, and will coincide with the new deadline to prevent sequestration that the Senate approved early this morning. Additionally, Congress has yet to finalize FY2013 appropriations and it seems clear that they will approve a year-long continuing resolution (CR) when the current CR expires at the end of March. The big question yet to be answered is how spending cuts will be determined if the across-the-board cuts are to be avoided by the new end of February deadline.

Fiscal Cliff Update

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The Senate reconvenes today and will make a last attempt to legislate before large automatic tax increases and spending cuts take effect on January 1st. The House is scheduled to meet only in a pro forma session after Republican leaders said the Senate would need to act first to produce a legislative solution after their own “Plan B” effort fell apart last week. House GOP leaders have promised to give members 48-hours notice before calling them back to the Capitol. As of this morning, that notice has not yet been given and the “fiscal cliff” countdown clock continues to wind down.

Most congressional leaders have signaled a strong desire to pass some sort of fiscal package before New Year’s Day. However, what sort of legislation could move quickly through the Republican House and Democratic Senate remains uncertain. President Obama is pushing for a less ambitious package that extends tax cuts on household income below $250,000, continues unemployment benefits, and delays the across-the-board spending reductions or sequestration. There is still time to get this done if the Senate can act quickly.

Another wrinkle appeared yesterday when Treasury Secretary Timothy Geithner sent an open letter to Congress noting that the national debt limit would be hit on December 31st. While the letter indicated that the Treasury could pursue “extraordinary measures” to postpone the impact of reaching the limit, it also cited the looming fiscal cliff for some uncertainty, saying “Given the significant uncertainty that now exists with regard to unresolved tax and spending policies for 2013, it is not possible to predict the effective duration of these measures.”

Finally, the White House issued guidance last week to federal agencies on how to handle sequestration if Congress fails to act by the end-of-year deadline. This is significant as it signaled a decision on the White House’s part to publicly prepare for sequestration, which they have avoided doing in the past. Of note in the guidance is that the implementation of sequestration would not result in a government shutdown, but rather a gradual reduction in spending that would begin to be felt in the early months of 2013 if a solution is not identified shortly after the New Year.

Everything is still very uncertain at this point.  We will continue to monitor the situation closely and report as new information becomes available.

Committee Assignments for New WA State Members

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Democratic Leader Nancy Pelosi yesterday announced that the Democratic Caucus approved a series of appointments of new and returning Members of Congress to House committee seats in the 113th Congress.  The newest members of the Washington State Delegation received favorable committee assignments, as follows.

Armed Services – Congressman-elect Derek Kilmer

The House Armed Services committee has exclusive jurisdiction for: defense policy generally, ongoing military operations, the organization and reform of the Department of Defense and Department of Energy, counter-drug programs, acquisition and industrial base policy, technology transfer and export controls, joint interoperability, the Cooperative Threat Reduction program, Department of Energy nonproliferation programs, and detainee affairs and policy.  Congressman Adam Smith (D-WA) is the Ranking Member of this committee.

Budget – Congressman-elect Denny Heck

The House Budget Committee is responsible for the annual adoption of a concurrent resolution on the budget as a mechanism for setting forth aggregate levels of spending, revenue, the surplus or deficit, and public debt.  This is a coveted committee position for the Congressman-elect.

Judiciary – Congresswoman Suzan DelBene

Among other things, the jurisdiction of the House Committee on the Judiciary includes Immigration policy and non-border enforcement; Interstate compacts; Patents, the Patent and Trademark Office, copyrights, and trademarks; Civil liberties; Constitutional amendments; and Criminal law enforcement; Federal courts and judges.

Fiscal Cliff Countdown: 26 Days

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Negotiations continue between the Obama administration and congressional leaders on deficit reduction legislation that would need to be approved by Congress before the end of the year to avoid the sequester and tax increases. Last week the President released his proposal, which took a hard line on both taxes and entitlement spending, with increased tax revenues accounting for the greatest share of deficit reduction.  Not surprisingly, that proposal was quickly criticized by republicans who then issued a counteroffer that was much more focused on entitlement cuts, although with substantial tax revenues included as well.

For their part, congressional democrats appear increasingly unwilling to major cuts to entitlements, which have been a big driver of spending over the past few decades. The state of affairs has led to predict that the nation may well go over the cliff and leave the difficult task of cleaning up the mess when the new session of Congress convenes in January.

Meanwhile, appropriators are working toward an omnibus FY 2013 spending bill that could emerge for a vote next week. The bill would complete the appropriations cycle for the full fiscal year if agreement can be reached. The government is operating through March 2013 under a continuing resolution that sets total discretionary spending in accord with the $1.047 trillion limit agreed to in the Budget Control Act. The omnibus may adopt this spending level for the full year, although House Republicans have sought to reduce that level by $19 billion.