The approach of Labor Day marks the traditional end of summer, along with the coming return of Members of Congress to Washington. This alert outlines what lies in store for the final months of the First Session of the 112th Congress, the anticipated focus of key legislative action, and forthcoming efforts to implement the Budget Control Act of 2011 (BCA).

Unlike past Augusts, the Congress technically remains in session. After the contentious conclusion of the debt ceiling debate and last-minute passage of the BCA, Members departed the Capital on August 3rd for their District Work Period. To prevent recess appointments by the President during the month, pro forma sessions have been convened every few days. A pro forma session permitted passage of an extension to the Federal Aviation Administration’s authorization thereby ending a legislative stand-off and resolving Congress' failure to act before leaving Washington which had caused the temporary furlough of aviation safety regulators.

The Senate is scheduled to reconvene for legislative business at 2:00 PM on Tuesday, September 6th, with the House following at noon the next day. The Senate’s first votes are expected to be a vote that evening on whether to end debate on a motion to proceed to the Patent Reform Act of 2011 (H.R. 1249) and a vote on an appellate court nomination.

The following outlines those issues that Congress is likely to consider in the coming months, several legislative issues that will be considered in key committees, along with important dates and deadlines related to implementation of the BCA. As a part of the BCA, a Joint Select Committee on Deficit Reduction (that has become commonly known as the Super Committee) will convene to produce a plan to reduce the country’s growing deficit by at least $1.5 trillion. The Super Committee must produce legislation by November 23rd and it has a December 2nd deadline to present a deficit reduction plan to the Administration and Congress. The Super Committee’s deliberations and its eventual work product will largely overshadow the consideration of other legislative matters throughout the next several months.

Continuing Resolution/Appropriations

While the work of the Super Committee will take up a substantial portion of the Congressional agenda, there remain a number of legislative issues that must be addressed in the short and medium term. Chief among these are consideration of a continuing resolution (CR) to fund the government beyond the current expiration date of September 30th. As the Congress has yet to pass and send to the President any of the annual appropriations bills for Fiscal Year 2012, it remains to be seen whether there will be a relatively short-term CR simply to allow the appropriations bills to be completed or a full-year CR that funds all departments and agencies and supplants the normal appropriations process. Given the challenges associated with debate on spending legislation throughout this Congress, the debate on the CR, of whatever duration, will likely occupy much of September.

Appropriations Status

In terms of specific appropriations measures, the following bills have yet to be considered in the House:

  • Commerce, Justice, and Science
  • Financial Services
  • Interior and Environment
  • Labor, HHS, Education
  • State, Foreign Operations

Prior to the August recess, the House commenced, but did not complete, debate on the Interior and Environment Appropriations bill. In the Senate, only the Military Construction and Veterans Affairs Appropriations measure has passed, and a conference committee has not yet convened to produce a report that resolves the differences between the House and Senate bills.

Trade

Heading up the trade agenda for the fall are three long-delayed Free Trade Agreements (FTAs) with South Korea, Panama, and Columbia. To navigate the concerns of a number of Democrats that FTAs harm American workers, Senate Finance Committee Chairman Max Baucus (D-MT) and House Ways and Means Committee Chairman Dave Camp (D-MI) have been negotiating a package that would include a vote on all three trade agreements, as well as an extension of Trade Assistance Adjustment (TAA) benefits for workers negatively affected by increased foreign trade. Should Senate Majority Leader Harry Reid (D-NV) schedule the trade agreement votes separately from the vote on a TAA extension, it could complicate efforts to pass these trade agreements.

Transportation

Senate Energy and Public Works Committee Chairwoman Barbara Boxer (D-CA) has announced her intention to hold a markup on a two-year surface transportation reauthorization bill after the August recess, which would provide an additional extension of the Surface Transportation Reauthorization Bill, otherwise know as SAFETEA-LU (Safe, Accountable, Flexible, Efficient Transportation Equity Act) and maintain current spending levels.. The current extension expires on October 1st, 2011, which coincides with the start of the new fiscal year as well as the expiration of the short-term extension of federal aviation programs.

Chairwoman Boxer says that her consolidated approach would reduce the number of programs from 87 to 30, increase funds for the Transportation Infrastructure Finance and Innovation Act (TIFIA), streamline and lower delivery costs, encourage innovation and education, provide funds for federal lands and tribal transportation programs, and eliminate earmarked projects. Ranking Member Jim Inhofe (R-OK), while supporting the proposed two-year extension, has stated that he does not believe that this bill should move forward until a $12 billion shortfall created by the bill is addressed.

In early July, Chairman John Mica (R-FL) of the House Transportation & Infrastructure Committee released an outline and summary of a six-year $230 billion surface transportation proposal, but has not yet introduced, or had the T&I Committee mark up, an actual bill. The substantial differences between the House and Senate proposals, including the differences in duration and funding levels, make it highly unlikely that there will be an agreement on a surface transportation bill before the October 1st deadline. Thus, an additional extension of SAFETEA-LU will be required. While extensions of transportation programs have been commonplace in the past, it could prove to be very challenging for the Congress to pass an unrestricted extension in the current budget environment.

As noted, the House and Senate reached an agreement to extend the Federal Aviation Administration’s authorization through September 30th, avoiding massive layoffs and delays in construction projects. It is expected that the two chambers will work on a longer-term agreement after the August recess. Currently, the primary stumbling blocks to progress are disputes over proposed changes to current labor laws regarding workers’ ability to organize, and disagreements over subsidies provided to smaller airports.

Tax Issues

Looking beyond September, certain provisions of the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010, commonly referred to as "Tax Extenders," will expire at the end of 2011, beginning another discussion centered upon spending and taxes. These provisions include extensions of the "bonus depreciation" allowance included in the Small Business Jobs and Credit Act of 2010, section 179 deduction thresholds, and alternative fuel and energy efficiency tax credits. While this debate will be integrally connected to the work of the Super Committee, the potential for stand-alone legislation remains a possibility.

Given the current economic climate and concerns over sluggish GDP growth, at minimum, the White House and its Congressional allies will likely push for extensions of the payroll tax credit and unemployment insurance enhancements included in last December’s Tax Hike Prevention Act of 2010. These combined programs cost approximately $170 billion for one year and will likely face opposition from Republicans. Next week when the President makes the major jobs speech that he has promised, he will answer the question of whether he is prepared to "go big" and propose costly new initiatives or whether he will offer only more modest jobs proposals that take account of both budget limitations and the steadfast opposition of most Congressional Republicans to new spending.

Health Issues

On January 1st, 2012, Medicare payments to physicians will be reduced 29.5% absent congressional action. Other Medicare-related provisions will expire on December 31st (e.g., outpatient therapy caps exceptions process). The Medicare physician fee schedule has plagued Congress for a decade, with annual temporary fixes implemented to avoid substantial physician payment cuts. The other Medicare "extenders" typically are included in the annual fee schedule fixes. While physician groups and many Members of Congress on both sides of the aisle prefer a full-scale fix to the physician fee schedule, the ten-year cost of such a fix could exceed $300 billion, with a one-year fix anticipated to cost $22 billion over ten years.

If the Medicare physician fee schedule and the other annual Medicare extenders are not included in a final deficit package, Congress will be forced to take up Medicare legislation prior to December 31st. While the policies surrounding these temporary Medicare extenders and the fee schedule enjoy broad bipartisan support, paying for the cost of these provisions remains an elusive goal.

Nominations

In the Senate, nominations to head the Federal Deposit Insurance Corporation (FDIC) and Office of the Comptroller of the Currency (OCC) remain pending. Martin J. Gruenberg has been nominated to succeed Shelia Bair as Chair of the FDIC and Thomas Curry has been nominated to the post of Comptroller of the Currency. In addition, the Senate Banking Committee will hold a September 6th nomination hearing for former Ohio Attorney General Richard Cordray, who has been nominated to head the Consumer Financial Protection Bureau (CFPB). Despite this hearing, Cordray’s nomination is unlikely to be voted on by the Senate. Banking Committee Ranking Member Richard Shelby (R-AL) and 43 other Republican Senators have vowed to oppose voting on any CFPB Director nominee unless and until various structural changes are made to the CFPB, which these Senators say will rein in the CFPB and make it more responsive to Congressional oversight.

Other Pending Matters

Flood Insurance

The Senate must work quickly to address the approaching September 30th deadline of the National Flood Insurance Program (NFIP). In July, the House overwhelmingly passed the Flood Insurance Reform Act of 2011, which would provide a five-year extension of the NFIP (H.R. 1309). Senate Banking, Housing, and Urban Affairs Committee Chairman Tim Johnson has indicated his desire to pass a long-term extension before the September 30th deadline, however floor time available for consideration of this legislation will be limited. If the Senate is able to pass its own legislation, differences between its bill and the House’s would need to be resolved, likely setting the table for one or more short term NFIP extensions until such differences are resolved. Recent damage to the Northeastern US as a result of Hurricane Irene will only add to the political challenges related to this program.

Patent Reform

Following the debate on the debt ceiling, President Obama argued that efforts to create jobs must be the focus of the Administration and Congress, including patent reform. Majority Leader Harry Reid has filed cloture on H.R. 1249, the House-passed Leahy-Smith America Invents Act. This legislation, if passed, would transition the U.S. to a "first-to-file" patent system and change the fee system at the Patent and Trademark Reform Office.

The Budget Control Act and Super Committee Actions

The broader Congressional agenda will occur in the context of the efforts by the Super Committee formed under the BCA to produce a deficit reduction package by November 23rd. The following are key highlights of the BCA and deadlines related to its implementation. Below is a list of upcoming key dates related to implementation of the Budget Control Act:

By September 16, 2011

The Super Committee must hold its first public meeting by this date.

Between September 30, 2011 and December 31, 2011

During this period, the House and Senate each must vote on a balanced budget amendment to the U.S. Constitution. This legislation will almost certainly fail to garner the support of 2/3 of the Senate as required for passage of amendments to the Constitution and will likely also fail in the House.

October 1, 2011

Unless the appropriations process is completed by this date, Congress will be forced to enact a continuing resolution funding the Federal government’s operations in order to prevent a government shutdown. A major question still to be determined is whether such a continuing resolution will be of relatively brief duration to allow the appropriations process to be completed or whether the CR will become a de facto omnibus appropriations bill for Fiscal Year 2012 that substitutes for the normal appropriations process.

By October 14, 2011

Congressional Committees may report deficit reduction recommendations to the Super Committee for its consideration. Please note that Committees are not required to provide any recommendations.

By November 23, 2011

The Super Committee must produce detailed legislation that would achieve at least $1.5 in additional deficit reduction over the period of Fiscal Years 2012 to 2021.

By December 2, 2011

The Super Committee's report, legislative language and CBO score must be transmitted to the Administration and Congress.

By December 9, 2011

All Congressional Committees to whom the Super Committee’s legislation is referred must report the legislation to the full House and Senate with no amendment.

By December 23, 2011

The House and Senate must vote on the Super Committee’s legislation which cannot be amended on the floor of either Chamber. A simple majority vote will be required in both the House and Senate to pass this legislation; 60 votes in the Senate will not be required.

October 1, 2012

If a bill does not become law by January 15th, 2012 that reduces the deficit by an additional $1.5 trillion over the next ten years, the Director of the Office of Management and Budget (OMB) must make cuts to defense and non-defense programs sufficient to produce $1.2 trillion in savings over ten years. If no additional deficit reduction becomes law, these automatic cuts of $1.2 trillion over ten years would represent a cut of approximately 8.0 percent from projected spending levels. Social Security payments, Medicare premiums, co-payments, and certain low income programs are exempt from these across-the-board cuts. The cuts to Medicare can only come from provider payments and are capped at 2 percent of the annual cost of the Medicare program. Military pay is also likely to be exempted from any automatic cuts to defense programs. Obviously, the size of these exemptions means that there will have to be substantially larger cuts to remaining programs than 8.0 percent to achieve the required $1.2 trillion in savings.