McDonald Hopkins Government Strategies Advisory: This Week in Washington -- July 17, 2015

The latest on the highway bill

As the clock ticks on the Highway Trust Fund, lawmakers are scrambling to find a way forward— at least a temporary one.

This week, House Republicans passed a short-term extension of highway authority until Dec. 18. The stopgap would allow House Ways and Means Committee Chairman Paul Ryan to craft a long-term international tax bill that, in theory, would also pay for a long-term highway bill.

The short-term extension in the House costs about $8 billion, and Ryan paid for it with a series of tax tweak, which even some in his party are calling "gimmicks," including changes to mortgage-reporting requirements, estate inheritance reporting, and tax-return due dates.

While the House passed a short term extension, Senate Republicans are still pushing for a long-term solution. Senate GOPers are considering a long-term fix that would be funded through a variety of revenue raisers that Senate Majority Leader Mitch McConnell (R-KY) laid out to his caucus this week.

While no final decision has been made as to how long a Senate highway bill would be authorized for, some estimates put it at as long as four years.

McConnell has reserved floor time next week for the highway bill—and the week after, if needed. He is also conferring with prominent Senate Democrats on the list of offsets to ensure that they won't derail the measure once it is on the floor.

Democrat Barbara Boxer (D-CA), who cosponsors the six-year policy portion of the highway bill, said she is carefully reviewing the GOP's list of possible offsets and has found no red flags for Democrats. "I'm encouraged by what I see," she said.

Democrats have been concerned that the Republicans would propose cutting entitlement programs like Medicare or Pell Grants in order to pay for the highway bill, but it is believed that idea is off the table.

Paul Ryan tackles welfare reform

Paul Ryan (R-WI), Chairman of the House Ways and Means Committee, has never been one to shy away from tackling big issues, which may explain why he is willing to tackle welfare reform.

Democratic and Republican staffers have been quietly working on legislation to significantly overhaul the Temporary Assistance for Needy Families (TANF) program— more commonly known as welfare— since late April, according to aides for both parties, and the draft bill got its first public airing in a subcommittee hearing on Wednesday.

The bill is a priority for Ryan, and both sides agree that the majority has actively worked to incorporate Democratic ideas into the proposal, providing real optimism that lawmakers could pass something this Congress, a decade since TANF was last reauthorized.

If a bill resembling the current draft gets done, it would be the most significant makeover of TANF—created in 1996 under President Bill Clinton and a Republican Congress to replace the previous welfare program—since its inception. The federal government and states spend about $30 billion annually on TANF, which serves about two million families.

Ryan said in the lame-duck session last year that he wanted to pursue welfare reform once he had the Ways and Means gavel. But the issue largely flew under the radar while Congress pursued a permanent fix to the flawed Medicare doctor-payment formula, debated fast-track trade authority, and waited for the Supreme Court to rule on the future of the Affordable Care Act.

TANF hasn't been properly reauthorized since 2005, and its current extension ends Sept. 30.

Three changes would likely have the biggest impact:

1. It would allow states to count more activities—such as job-skills training and education—toward the program's work requirements. States ostensibly are required to have at least 50 percent of their TANF recipients participate in some kind of work activity for a set number of hours per week to avoid financial penalties.
2. It would eliminate a number of loopholes that states have used to count toward that work-activity measurement, meaning states would need to have more people actually working to receive benefits. Aides cited those two provisions as an example of the bill's bipartisan nature: Democrats have long wanted more activities to count as work and Republicans have wanted to ensure that more beneficiaries participate in work activities.
3. The bill would create a new accountability system. States would have new outcome metrics to measure whether people leaving TANF found employment and increased their income. If states fail to meet the metrics, they could lose a portion of their TANF funding starting in 2018, which they would be able to earn back as they made improvements.

Those are also some of the provisions that could trip the legislation up as it attracts more public scrutiny. Some Democrats might not be happy that the program's spending is kept flat. TANF was created as a set block grant, so liberals emphasize that its real value has declined since 1996. On the other side, conservatives could take issue with expanding what counts as work toward the program's requirements.

Watch the latest Washington Business Brief video, Busy July for Congress

Senate passes NCLB reform

On Thursday, the Senate overwhelmingly voted to overhaul the No Child Left Behind law, which was passed under former President George W. Bush.

The Every Child Achieves Act, which transfers more decision-making power to state and local authorities, passed by a vote of 81 to 17 and represents a rare moment of bipartisanship in Congress and a significant achievement for Senate Majority Leader Mitch McConnell (R-KY).

The legislation had been spearheaded by Sen. Lamar Alexander (R-TN), who thanked both ranking member Senator Patty Murray (D-WA), as well as Senate Minority Leader Harry Reid (D-NV) for their help in getting the legislation passed.

The 2002 No Child Left Behind law, which included a reauthorization of the Elementary and Secondary Education Act (ESEA), expired in 2007. Congress has not passed legislation to extend it since then.

Advocates of the Senate reform bill say that it will end the “teach-to-the-test” mentality that had been a criticism of public school education since the package of NCLB in 2002.

It would require states to set up their own standards for student achievement, attendance, and graduation with several federal guidelines. Republicans have been anxious to return more control of schools to the states, particularly in recent years as they have watched the Education Department dictate the conditions that give states waivers from current law. In order to keep Democrats on board, the bill retains a number of funding and student-achievement priorities.

The bill dodged a major bullet when an effort by immigration conservatives, led by Senator Ted Cruz (R-TX) to attach legislation cracking down on so-called “sanctuary cities,” failed. The effort, which was in response to the killing of a woman in San Francisco by an illegal immigrant who had been deported five times, would have threatened to undermine the support of many Democrats in the upper chamber.

The bill will now head to a conference with House lawmakers – who themselves passed a more conservative NCLB reform bill earlier in July. The future of the bill remains murky, even if House and Senate conferees are able to reconcile differences between the NCLB reform bills, it is unclear whether President Obama would be willing to sign whatever might emerge. Indeed, the White House had expressed opposition to both the House and Senate bills when they were being considered.

Boehner seeks to avoid social issues

Social issues have long been a thorny area for Republicans on the Hill, and six months into the 114th Congress it’s clear that Speaker of the House John Boehner (R-OH) is doing his best to steer his caucus clear of these kinds of issues.

When moderates and GOP women criticized a late-term-abortion bill, the leadership pulled it from the floor until compromise language could be drafted, despite conservatives urging a vote. When Democrats attached provisions barring the display of the Confederate flag in federal cemeteries to an Interior spending bill, leaders pulled that measure too and—at least for now—have stalled the entire appropriations process until it can be resolved.

On Tuesday, leaders delayed a commemorative-coin bill that would fund Susan G. Komen for the Cure over conservative outrage that the breast-cancer organization is allied with the abortion-rights group Planned Parenthood. And Boehner and his team have no plans to bring a religious-freedom bill to the floor in the wake of the Supreme Court's decision granting marriage rights to gay couples, despite its endorsement by conservative groups and more than 100 cosponsors, including Majority Whip Steve Scalise (R-LA).

As the country heads into a presidential-election year during which many Republicans believe the party will need to reach out to a broader base of voters, this strategy could bear fruit for GOPers up and down the ballot.

Despite the challenges of leading an incredibly diverse caucus, House Republican leaders have been able to smooth over concerns in at least some cases. The late-term abortion bill was salvaged when language protecting victims of rape was added to assuage women's concerns. And leaders are hoping to bring back the commemorative-coin bill in a way that excludes groups that are involved in abortion.

Inside the Iranian nuclear deal

This week, the Obama administration – along with a group of international allies – announced a deal with the Iranian government that is aimed at curtailing Iran’s nuclear weapons program in exchange for lifting international economic sanctions.

The text of the agreement is 159 pages long, and is the result of intense diplomatic efforts by the Obama administration, spearheaded recently by Secretary of State John Kerry. The announcement of the deal immediately brought criticism from most Republicans and even some Democrats, but President Obama has pledged to veto any effort by Congress that seeks to undermine the deal’s implementation.

While the deal itself is long and complex, here are the topline takeaways:

1. Reduces Iran's stockpile of enriched uranium.
   "Iran reaffirms that under no circumstances will Iran ever seek, develop, or acquire any nuclear weapons," the text of the final agreement reads.
   
   According to Secretary of State John Kerry, "Iran's total stockpile of enriched uranium, which today is equivalent to 12,000 kilograms ... will be capped at just 300 kilograms for the next 15 years."
2. Reduces the number of centrifuges Iran can use in the enrichment of uranium. Some types of centrifuges will be phased out entirely.
   "Iran will continue to conduct enrichment R&D in a manner that does not accumulate enriched uranium," the text of the deal reads. Kerry said some of this research and development may include developing cancer medicines from radioactive materials.
3. Increase the "breakout" time to one year for the next decade.
   Breakout time, as defined by the White House, is the amount of time it would take for Iran to produce a weapon given its nuclear infrastructure, according to a senior administration official. Currently, according to the Washington Post, the breakout time is a few months.
   
   It takes a lot of time and effort to enrich uranium ore to weapons-grade material. If we set Iranian's production output, and we know how much raw material it is processing, we can calculate the time it would require to amass the critical amount of enriched uranium needed to build a weapon.
4. Reduces sanctions on the Iranian economy.
   "The relief from sanctions will only start when Tehran has met their key initial nuclear commitments," Kerry said when announcing the final deal Tuesday morning. White House officials on a briefing call explained that if Iran violates the rules, sanctions can "snap back" into place.
   
   "This [Joint Comprehensive Plan of Action] will produce the comprehensive lifting of all U.N. Security Council sanctions as well as multilateral and national sanctions related to Iran's nuclear programme, including steps on access in areas of trade, technology, finance, and energy," the text of the deal reads.
   
   A lift in sanctions means that Iran will be able to use international banking systems. According to The Wall Street Journal, between $100 billion and $140 billion of Iran's assets have been frozen in international accounts. Lifting sanctions will free that money.
5. Insures ongoing international verification of Iran's agreement.
   The International Atomic Energy Agency is tasked with monitoring Iran's nuclear facilities for at least the next 25 years.
   
   According to the deal, these measures include: a long-term IAEA presence in Iran; IAEA monitoring of uranium ore concentrate produced by Iran from all uranium ore concentrate plants for 25 years; containment and surveillance of centrifuge rotors and bellows for 20 years; use of IAEA approved and certified modern technologies including on-line enrichment measurement and electronic seals; and a reliable mechanism to ensure speedy resolution of IAEA access concerns for 15 years.

Senate Approps advances another bill

On Thursday, the Senate Appropriations Committee approved a $20.5 billion Agricultural bill. This is the 11th of 12 spending bills that has moved forward out of committee in the Senate.

The bill, which checks in at $65 million less than the current funding level and more than $1 billion below what President Obama requested, provides funding – for among other items – the Department of Agriculture (USDA) and the Food and Drug Administration (FDA).

Democrats – led by ranking member Senator Barbara Mikulski (D-MD) – criticized the bill for failing to adequately fund “agricultural and food safety needs.”

Senator Jeff Merkely (D-OR) offered a Democratic alternative in committee that would have increased funding levels for both the USDA and the FDA. Merkely’s alternative, however, was defeated by the Republican majority on the committee.

Not all efforts to amend the bill failed in committee. The committee passed amendments to relax school lunch rules on whole grain products and sodium, require the FDA to label genetically engineered salmon and direct the USDA to seek public comment on a proposed rule regarding captive marine mammals.

The agriculture spending bill has drawn fire in the past few years because it includes the Supplemental Nutrition Assistance Program (SNAP), which is better known as the food stamp program. Over the years, the program has been a battleground between conservatives who want to reform and reduce the program and progressives who have sought to increase funding for it.

Democrats on the committee said the current funding bill fails to include needed funding increases for climate change, antibiotic resistance or other research areas. Democrats also say the bill fails to adequately fund the FDA Safety and Innovation Act.

Can a bipartisan majority repeal the Medical Device Tax?

Last month, the House voted 280 to 140 to repeal the medical device tax. Two years ago, the Senate passed a nonbinding resolution – by a vote of 70 to 20 – calling for repeal of the tax. Despite these large bipartisan and bicameral majorities, the question remains whether or not the medical device tax will finally be repealed.

One big stumbling block remaining to repeal? The Obama White House, which has threatened to veto such a bill.

Majority Leader Mitch McConnell (R-KY) cleared a path for the House bill last month, using a legislative maneuver that would allow it to bypass the committee and head directly to the Senate floor. So far, however, the bill has not yet been put on the Senate schedule.

A two-thirds vote in each chamber is needed to override a presidential veto. But supporters admit this is unlikely.

Republicans are united in their support for the repeal of the tax, even as they continue to push for repeal of the entirety of the Affordable Care Act. Democrats, on the other hand, range from hesitant to very concerned about the repeal, except for a handful of supporters.

Minority Leader Harry Reid (D-NV) was among the fewer than two dozen senators who voted against the repeal in the 2013 budget amendment and has not indicated a change in position.

One of Democrats' key concerns is that they haven't yet seen any offsets to the tax.

"It's a big hole in the budget if you repeal the entire tax," Minority Whip Dick Durbin said. "I've said I'm in favor of changing it to help those companies that are struggling, but I want to do it in a budgetary way that doesn't jeopardize the deficit or the Affordable Care Act."

It's unclear whether the repeal will be put forth on its own or as part of a larger package. Republicans aren't lacking for options—they could put it in an Obamacare repeal that passed through reconciliation, should they choose to use the tool that way. But if they do that, they face another veto—one that definitely could not be overcome. The tax repeal could also be included as part of a spending bill.

Despite all of the barriers to it becoming law, the repeal of the medical-device tax might be Congress's best chance of taking any form of bipartisan action on the Affordable Care Act, whether it be framed as strengthening the law or getting rid of it one piece at a time.

Patent troll bill stalls

The Innovation Act, which aims to stop “patent trolling,” once seemed like it was on a path to the president’s desk, now faces an uncertain future after a sudden burst of bipartisan opposition to the bill.

The bill seeks to end patent trolling by altering several aspects of how patent-infringement cases are litigated. The House was expected to take the measure up next week, but given the sudden burst of opposition, now appears likely to put it off until after the August recess.

The rising tide of opposition to the bill may be a result of intense lobbying by pharmaceutical companies, who are asking for a carve-out in the bill—something that is being advocated by Rep. Scott Peters (D-CA). But many groups oppose any special treatment for the pharmaceutical industry, including AARP, which is worried it could lead to skyrocketing drug costs for Medicaid and for seniors totalling in the tens or hundreds of billions of dollars.

Among those that have flipped their position are Democratic Reps.Ted Deutch (D-FL) and Karen Bass (D-CA), both members of the Judiciary Committee, who sent out a Dear Colleague letter Tuesday urging other lawmakers to oppose the Innovation Act. The pair argued that rushing to enact comprehensive new legislation amid other recent changes to the patent litigation landscape, including the passage of the America Invents Act in 2011 and a spate of Supreme Court rulings last year, could have unintended and harmful consequences.

The concern undergirding the likely delay is not that the Innovation Act would not pass—the measure quickly sailed through the House last Congress with a lopsided 325 to 91 victory before patent-reform efforts stalled in the Senate. Though the bill would likely cruise to another strong passage, the bill's handlers and House leaders fear that a less decisive win could weaken momentum for reform in the Senate and lower the House's leverage in conference negotiations.

Passing legislation to curtail patent trolling—the act of using weak patents to threaten infringement lawsuits against others in the hopes of reaping big cash settlements—is a top priority for many Silicon Valley tech companies and startups, who say the practice has exploded in recent years, particularly in the software arena. But a host of other stakeholders, ranging from universities to trial lawyers and pharma, warn that overcorrecting the patent system could do more harm than good.

Patent reform has also bedeviled lawmakers due to the complicated nature of the legislation, and how slight tweaks to obscure provisions can prompt intense backlash. On Tuesday, a group consisting mostly of tech companies including Dell, Samsung and HP, sent a letter to House leadership raising strong opposition to sections that would change how the Patent and Trademark Office's process for challenging a patent after it has been granted.

The Senate Judiciary Committee also advanced its own reform measure, the Patent Act, on a 16 to 4 vote last month. Senate Majority Whip John Cornyn has said there is "no specific timetable" for bringing that bill to the floor. Though the two bills are similar, several key differences remain between the two, including language that involves fee-shifting, or the principle of making it easier for winners of frivolous patent infringement suits to force the losing party to pay for legal fees.

Transportation in Focus

Cruz threatens to filibuster the transportation bill

As both chambers are working on finding a path forward for the highway bill, an issue unrelated to surface transportation may pose a threat to any legislation, particularly in the Senate.

Senate Majority Leader Mitch McConnell (R-KY) has signaled that he will allow a vote on the Export-Import bank as part of the Senate’s consideration of the highway bill. Such a move is outraging opponents of the bank.

At a press conference this week, conservative firebrand Sen. Ted Cruz (R-TX) hinted that he would consider using the filibuster to prevent passage of the transportation bill if it includes a provision to reauthorize the Export-Import Bank.

“I'm willing to use any and all procedural tools to stop this corporate welfare and this corruption from being propagated,” Cruz said at a press conference in Washington on Wednesday where he was joined by conservative leaders from the House and top conservative interest groups like Heritage Action and Tea Party Patriots.

The Export-Import Bank expired at the end of June, but supporters hope to see the House and Senate move legislation extending the charter this month. Ex-Im finances overseas investments by U.S. companies. Detractors argue its work is better done by the private sector, but supporters argue the bank helps create U.S. jobs and that economic rivals of the United States would benefit if the bank was killed.

The bank’s supporters are hoping to include reauthorization language in a must pass piece of legislation like the highway bill, which expires at the end of July.

 

  

 Steven C. LaTourette, President | 202.559.2600

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