A busy and often tumultuous year in Congress reached its zenith on Tuesday when members of the House of Representatives rejected a bill carefully negotiated in the Senate to resolve several important matters that require action by the end of year. Front and center in the controversy was the payroll tax rate, which was reduced last year from 6.2 percent to 4.2 percent as means of providing relief to middle-class families and spurring economic growth.
The tax cut is set to expire on December 31, 2011 and while members of both parties agree that the rate should be extended, differences over how the legislation should be paid for left a compromise out of reach until last Friday. On that day, the Senate was able to pass a twomonth extension of the tax cut (“Senate bill”) before adjourning for the remainder of the year. After passage, the bill was sent to the House for what was expected to be a noncontroversial vote. Instead, the Republican-lead House decided not to vote on the Senate bill and passed its own bill which preserves the tax cut for 12-months. However, the House bill also includes many provisions untenable to the Democratic-led Senate and the White House (“House bill”). With less than two weeks before the tax rate reverts to 6.2 percent it is not clear how or even if the issues involved can be resolved.
Below is information on the impasse between the House and Senate on the payroll tax and other expiring measures as well as other noteworthy news from Congress.
Failure of the House and Senate to Reach Accord Leaves Tax Cut, Jobless Benefits, Doctor Payments in Jeopardy
On December 20, 2011- by a vote of 229 to 193, the House rejected the Senate bill. The Senate bill had passed in an overwhelming and bipartisan vote of 89-10. Instead, the House advanced its own legislation extending the payroll tax. In doing so, the House requested a formal conference with the Senate, setting up a political standoff with the Democraticcontrolled Senate and President Obama, both of whom urged the House to approve the short-term measure in order to prevent rates from rising on January 1, 2012. They further asserted that the extension would allow leaders time to negotiate a full-year extension of the tax rate.
In choosing to consider and pass their own bill, Speaker John Boehner (R-OH) said his Caucus opposed the Senate bill “because the two-month extension will create more uncertainty for job creators in our country when millions of Americans are out of work.” He also argued that “payroll processing companies say that the Senate bill is unworkable.”
How Congress and the President go about trying to resolve the situation remains unclear. Senate Majority Leader Harry M. Reid (D-NV) has rejected the idea of a conference between the House and Senate as well as the notion of calling Senators back to vote on a new bill, arguing that Speaker Boehner violated a deal reached between both parties by refusing to hold a vote on the Senate bill.
The House can choose to take up the Senate bill at any time, but Republican leadership has already alerted it’s Caucus that it has no plans to do so, and has further instructed them that members can leave town (informing them that should the House proceed with any legislation, members will have at least 24 hours notice).
What Is In the Senate Bill
Under the Senate bill, the payroll tax rate would remain at 4.2 percent through February, rather than reverting to 6.2 percent on January 1. The two-month package would cost $40 billion and be paid for by instituting higher fees on Fannie Mae and Freddie Mac. Another component of the agreement, included to make the deal palatable to House and Senate Republicans, will require the Obama Administration to determine within 60 days whether to approve the 1,700 oil pipeline from Canada to the Gulf, known as the Keystone XL pipeline.
In addition to the payroll tax, the Senate bill would also extend benefits for the long-term unemployed for two months, and delay scheduled cuts to Medicare reimbursement rates for doctors.
What is in the House Bill
The House bill extends the 4.2 percent payroll tax rate for 12-months and delays for two years a reduction in Medicare reimbursement rates for physicians. It is strongly opposed by the Obama Administration and Democrats in Congress because of reforms it makes to the unemployment insurance program such as reducing the number of weeks people can apply for benefits from 99 to 59, and instituting new eligibility requirements such as drug screening.
Medicare Reimbursements for Physicians
Though it has received less attention from the press, the standoff between the House and Senate has serious consequences for physicians. Included in the Senate bill was a provision delaying for two months a scheduled reduction in Medicare reimbursement rates for physicians. Without legislation, doctors will see their Medicare payments cut by 27 percent on January 1.
Congress Passes Legislation Funding the Government for the Remainder of FY 2012
Also last week, members of the House and Senate were able to pass legislation funding the government for the remainder of Fiscal Year 2012. As the week of the December 12 began, Congress had not completed action on nine of the 12 appropriations bills for FY 2012, which began October 1, and faced the possibility of a government shutdown as funding was set to expire at midnight on Friday, December 16. At almost the eleventh hour, leadership of the House and Senate struck a deal funding the government for the remainder of the fiscal year and averting a devastating government shut down.
The resulting legislation funds the departments and agencies covered by nine regular appropriations bills — the Defense, Energy-Water, Financial Services, Homeland Security, Interior-Environment, Labor-HHS-Education, Legislative Branch, Military Construction- VA, and State-Foreign Operations bills. Combined, the nine bills provide about $915 billion in discretionary spending subject to the $1.043 trillion cap on discretionary spending for FY 2012 set by the Budget Control Act.
The omnibus agreement provides the following amounts:
- Defense — $518.8 billion in base funding for the Defense Department, $20.8 billion (4 percent) less than the President's FY 2012 request. The bill also includes $115.1 billion for overseas contingency operations associated with the wars in Afghanistan and Iraq, $43 billion less than the current level.
- Energy-Water — $32.1 billion in funding for the Energy Department and related agencies, $4.5 billion (14 percent) less than the President's FY 2012 request. The bill increases funding for nuclear defense programs, nuclear energy research, and energy related science programs over comparable FY 2011 levels. The agreement contains a provision prohibiting the Department from using funds to enforce the federal efficiency standards for light bulbs which will go into effect on January 1, 2012. The inclusion of the provision is a major concession by the Obama Administration, which strongly supports the new standards.
- Labor-HHS-Education — $723.9 billion, a reduction of Labor-HHS related discretionary spending by $1.4 billion. The measure provides $509.8 billion for the Centers for Medicare and Medicaid Services. Major funding reductions include lowincome heating assistance and substance abuse programs. The agreement contains policy provisions barring the use of federal funds for needle exchange programs and prohibiting the implementation of mine safety rules regarding exposure to coal dust.
Senator Ron Wyden and Representative Paul Ryan Introduce a Plan to Reform Medicare Overhaul
On December 15, Senator Ron Wyden (D-OR) and Representative Paul Ryan (R-WI) announced that they had reached a compromise on a modified version of the Wisconsin Republican’s “premium support” plan, commonly referred to as the “Ryan Plan.”
Under Ryan’s original premium support plan, Medicare enrollees would pick from a menu of competing plans with a fixed government payment to help defray premium costs. Enrollees would be responsible for any charges above the government contribution, but they could save money by selecting a plan with a premium below the federal subsidy.
In the new Wyden-Ryan plan, a Medicare marketplace would be created beginning in 2022, where seniors could choose between traditional Medicare and approved private insurance plans that offer equally comprehensive coverage. Under the proposal, seniors would receive a set payment from the government to purchase insurance with the amount varying based on the actual cost of each policy. The second-least-expensive plan, including traditional Medicare, would set the benchmark for coverage each year. Some seniors with higher incomes would pay an increased share of their premiums in the new Medicare marketplace.
The proposal would also add catastrophic health care coverage, with a limit on out-of-pocket costs, to Medicare for the first time.
New Legislation Introduced Amending the Copyright and Communications Acts:
Senator Jim DeMint (R-SC ) and Representative Steve Scalise (R-LA) have introduced the "Next Generation Television Marketplace Act" in the House and Senate to update various provisions of the Communications Act and Copyright Act governing the relationships between and among content creators, network programmers, television broadcast stations, and cable and satellite providers. Among other things, the legislation would (i) repeal those provisions of the Communications Act that mandate the carriage and purchase of commercial broadcast signals by cable operators, satellite providers, and their customers ; (ii) repeal the Communications Act's "retransmission consent" provisions , the Copyright Act's "compulsory license" provisions, and the FCC's "territorial exclusivity" rules, thereby allowing negotiations for the carriage of commercial broadcast stations to take place in the same deregulated environment as negotiations for carriage of non-broadcast channels; (iii) repeal certain local ownership limitations imposed on broadcaster and cable operators; and (iv) repeal statutory rate regulation and leased access mandates apply only to cable television and that are unnecessary in today's highly competitive video environment.
Senate Republicans Successfully Block CFPB Nomination
On Thursday, December 8, Senate Republicans succeeded in sustaining their filibuster of President Barack Obama’s nomination of Richard Cordray to be the first director of the Consumer Financial Protection Bureau (“CFPB”). The 53-45 vote fell seven shy of the 60 needed to end the Republican-led filibuster and advance Cordray’s nomination to an up-ordown vote.1
In initiating the filibuster, Republicans made it clear they had no opposition to Cordray, but rather the structure and authority of the CFPB, which they say allows the agency to operate without effective oversight from Congress. Moving forward, Senate Minority Leader Mitch McConnell has promised to filibuster any CFPB nominee until the agency’s structure is changed, particularly eliminating the role of the director and in its place instituting a board of directors. McConnell also demands that Congress be able to directly set CFPB’s budget through the appropriations process.
The CFPB’s lack of a director has meant that the Agency has been unable to carry out many of the functions it was granted when it was created as part of the financial regulatory reform law, known as the Dodd-Frank Act. According to the law, without a director, the agency cannot regulate nonbank financial businesses, including payday lenders, mortgage companies and debt collection agencies.
In response to the filibuster, President Obama told reporters that he was “considering all options,” including appointing a Director through a recess-appointment.
EPA Announces New Standards for Power Plant Emissions
The Obama Administration announced today that the Environmental Protection Agency (“EPA”) had approved a new rule limiting emissions of mercury, arsenic and other toxic substances from power plants.
The rule regulating mercury pollution, a dangerous neurotoxin that is particularly harmful to children and pregnant women, has been in various stages of development since Congress passed the Clean Air Act Amendments of 1990. EPA first finalized a regulation of the toxin at the end of the Clinton Administration, only to have the Bush Administration undue it at the strong urging of the coal-burning industry, which argues that the cost of installing pollution-control equipment will lead to a loss of jobs in the U.S.
The rule would require power plants to reduce mercury emissions by 91 percent and the EPA estimates that by 2016, the rules could avert between 6,800 to 17,000 premature deaths annually. Opposition among Republicans in Congress to the new regulation is strong. The House passed legislation in September overriding the regulation and similar legislation has been introduced in the Senate.