A slew of thorny issues awaits President Obama and Congress in the lame-duck session, ranging from taxes to defence to Medicare. Obama’s victory increases the chances that the lame-duck will be productive, but it remains to be seen if the president and leaders of Capitol Hill can break the gridlock that has gripped the 112th Congress. LEADERSHIP’s ABIODUN OLUWAROTIMI writes on major policy matters most likely to be addressed in the coming weeks.
Expiring Bush-era tax rates: Obama clearly has leverage, especially because the 2001 and 2003 tax rates, lowered during President George W. Bush’s administration, expire at the end of the year. Obama has vowed not to renew the rate for families making more than $250,000 a year, which would allow it to rise to Clinton-era levels. Despite the rhetoric, a compromise at a $1 million threshold could be reached. Another possibility is extending the Bush rates temporarily in exchange for future tax revenue increases as a part of broader tax reform.
Sequester: Under the terms of the August 2011 debt-ceiling deal, $109 billion in across-the-board spending cuts is set to hit in January. Defence would take a $55 billion hit. Congress will look to replace at least this first slice of more than $1 trillion in 10-year reductions with targeted cuts to mandatory spending and possibly tax increases. A “grand bargain” replacing all the cuts and tax increases in the fiscal cliff is probably not feasible in the lame duck, but a framework for future action in 2013 could materialise.
Hurricane Sandy supplemental spending bill: The damage from Sandy will still be big news when Congress returns next week. Forty-four members of the House signed a bipartisan letter urging leaders to be prepared to increase the Federal Disaster Relief Fund’s $7.1 billion budget.
Alternative Minimum Tax (AMT) patch: Unless Congress acts, millions of middle-class workers will come under the umbrella of the AMT for the current tax year. Indexing the AMT exemption for inflation retroactively would be a nightmare.
Capital gains tax rate: After December 31, the tax rate on investments held for more than one year will rise for middle-income and higher-income earners, from 15 percent to 20. Obama wants to preserve the rise for higher-income earners. Some Republicans want the rate dropped to zero to spur investment.
Medicare doc fix: Unless Congress acts, Medicare payments to doctors will be slashed by 27 per cent in January.
Omnibus Appropriations Bill: The six-month continuing resolution put the government on autopilot until March. If replacing the sequester involves discretionary cuts, there would be momentum to replace the continuing resolution with 12 detailed bills.
Postal reform: The beleaguered U.S. Postal Service this fall defaulted on $11 billion in retiree healthcare payments. The Senate and House have different approaches to revamping the USPS.
Payroll tax cut extension: House Democrats have suggested continuing the two percentage point reduction in the payroll tax that was extended in February. Some liberals are suggesting that reviving the 2009 stimulus’ Making Work Pay tax credit is a better idea.
Unemployment insurance extension: Under an agreement forged in February, extended federal benefits have been gradually curtailed and are set to expire for the long-term unemployed at year’s end.
Tax extenders: A package dealing with most of the 73 targeted tax credits has passed the Senate Finance Committee. The $205 billion bill would patch the AMT and contains items like the research and development tax credit and a production tax credit for wind projects.
Defence authorisation: A Defence Authorisation Bill has passed for each of the last 50 years, and the Senate is unlikely to break that streak in the lame duck. The Senate Armed Services Committee passed a $631.4 billion bill with $4 billion less in funding than the House-passed bill. The House measure seeks to ban gay marriage on military bases.
Farm bill: The Senate passed a bill, but House GOP leaders have refused to act on a pending plan in the lower chamber. Liberals are opposed to food-stamp cuts in both bills, while conservatives want deeper cuts.
Online poker: Reid wants action in the lame duck on a bill legalising online poker and online lottery sales.
Infrastructure bank. Sandy has exposed weaknesses in transportation and water infrastructure and could boost plans to fix crumbling roads, bridges, ports and tunnels. Obama incorporated a bipartisan proposal to create a national infrastructure bank in his stalled 2011 Jobs Act.
Foreign Intelligence Surveillance Act. The Senate might consider the controversial FISA amendments bill in the lame duck. The legislation would reauthorise spying on foreign communications without a judicial warrant. The House has approved a five-year extension of the authority, which expires in January.
Violence Against Women Act: VAWA became a major campaign-season talking point for Democrats, who claimed the GOP was waging a “war on women.” The House and Senate have passed different versions of VAWA legislation, which seeks to extend funding to investigate and prosecute domestic violence.
Permanent Normal Trade Relations (PNTR) for Russia: Russia joined the World Trade Organisation (WTO) this summer with the backing of the United States. At this point, U.S. exporters cannot enjoy the lower tariffs Russia is granting other WTO members, because the U.S. has not permanently removed long-standing conditions on trade with Russia from the Soviet era. PNTR is heavily supported by the business community.
Airline emissions: The European Union has enacted a climate-change plan whereby airlines servicing the continent will have to buy carbon credits. The Senate on September 22 passed a bill aimed at shielding U.S. airlines from paying greenhouse-gas penalties. The House passed a similar version of the bill in 2011 and might be amenable to passing the Senate version.
Benefits for same-sex partners of federal workers: Retiring Sen. Joe Lieberman (I-Conn.) has pushed a bill that would provide retirement and health benefits to same-sex domestic partners of federal workers. Sen.-elect Tammy Baldwin (D-Wis.) sponsored the House version.
?
Online sales tax: Retail groups have been pushing hard for an online sales tax measure they say will level the playing field between brick-and-mortar stores and online retailers. Similar, but not identical, bipartisan measures in both the House and Senate would allow states to collect from out-of-state retailers. Some conservatives, such as Sen. Jim DeMint (R-S.C.), oppose it.
Cybersecurity: Senate Republicans blocked the Cybersecurity Act of 2012, sponsored by Sens. Lieberman and Susan Collins (R-Maine), in September, and a compromise has been elusive, given business opposition.
China currency: China currency played a big role in the presidential campaign, with Mitt Romney vowing to name China a currency manipulator on day one of his administration. The Senate passed a bill 63-35 last year to hit China with tariffs, but it has not been taken up by House GOP leaders.
Mortgage Forgiveness Debt Relief extension: Under permanent tax law, mortgage debt that is forgiven by a bank, either through a principal reduction or a short sale, is taxed as income. But the Mortgage Forgiveness Debt Relief Act, passed in 2007 in an effort to boost the ailing housing market, allowed taxpayers to exempt that forgiveness from their tax bill. Now the law is set to expire, and industry groups and housing advocates are pushing to get it extended as part of any broad legislative package.
Consumer Financial Protection Bureau fix: Obama’s win means that repealing Dodd-Frank is off the table. But the financial industry and both parties want to tweak part of the Wall Street reform law, which created the CFPB, that contains a technical oversight that could endanger vital information handed to the new regulator.
