capital thinking ~ march 11, 2013

March 11, 2013

Patton Boggs Capital Thinking Weekly Update | March 11, 2013 1 of 16

General Legislative Today, March 11, the House will meet at 10:00 am in pro forma session. No votes are expected. On Tuesday, March 12, the House will meet at 12:00 pm for morning hour and 2:00 pm for legislative business. Votes will be postponed until 6:30 pm. Legislation Considered Under Suspension of the Rules will include: (1) H.R. 749 – Eliminate Privacy Notice Confusion Act; and (2) H.R. 1035 – To require a study of voluntary community-based flood insurance options and how such options could be incorporated into the national flood insurance program, and for other purposes. On Wednesday, March 13, the House will meet to consider H.R. 890 – Preserving Work Requirements for Welfare Programs Act of 2013, Rules Committee Print. Then, on Thursday, March 14, and Friday, March 15, the House will meet to consider H.R. 803 – Supporting Knowledge and Investing in Lifelong Skills (SKILLS) Act, Rules Committee Print. Last votes are expected no later than 3:00 pm on Friday. The Senate will convene today, March 11, at 2:00 pm and begin a period of morning business until 5:00 pm. Thereafter, the Senate will proceed to executive session to consider the nomination of Richard Taranto of Maryland to be United States Circuit Judge for the Federal Circuit and Andrew Gordon of Nevada to be United States District Judge for the District of Nevada.

Agriculture and Food LEGISLATIVE ACTIVITY

Continuing Resolution and Sequestration Flexibility. Today, Monday, March 11, Senate Majority Leader Harry Reid (D-NV) will look to begin debate on the FY 2013 Continuing Resolution (CR) that will likely include the Agriculture appropriations bill, which funds the Department of Agriculture and the Food and Drug Administration (FDA). The CR package is not likely to include the Financial Services bill, which funds the Commodity Futures Trading Commission. Senate Democrats, including Appropriations Chairwoman Barbara Mikulski (D-MD), are aiming to grant both the Department and FDA greater flexibility in managing their sequestered-impacted budgets for the remaining six months of FY 2013. Ranking Member Richard Shelby (R-AL) supports Chairwoman Mikulski’s package; however, other Senate Republicans, including John Thune (SD), are more cautious about the bill because of concerns that carve outs and exemptions will only lead to a more political bill, which would be a “heavier lift” for the Senate to pass.

The bill, however, is not fail safe in preventing USDA’s anticipated furloughs of meat inspectors for 11 to 15 days, and we expect Ranking Member of the Agriculture Appropriations Subcommittee Roy Blunt (R-MO) to offer an amendment that would exempt the Department’s meat inspectors and other “essential” workers from sequestered-enforced furloughs. According to the National Association of State Departments of Agriculture, without key protections from Congress, sequestration will cut funding for: (1) animal and plant health programs; (2) specialty crop block grants; (3) biotechnology inspection; (4) egg grading; and (5) FDA food, diary, and egg safety programs.


Upcoming Hearings. This week, a number of hearings will focus on immigration reform. On

Thursday, March 14, the House Judiciary Subcommittee on Immigration and Border Security will hold a hearing on the “Separation of Immigrant Nuclear Families,” and the House Appropriations Subcommittee on Homeland Security will hold a hearing on “Immigration Enforcement.” On the same day, the House and Education and the Workforce Subcommittee on Workforce Protections will hold a hearing on “Lower-Skilled Guest Worker Programs.”

The House Agriculture Committee will hold its hearing on the “Modifications of Dodd-Frank Act,” and the House Appropriations Subcommittee on Agriculture, Rural Development, and FDA will hold its hearing on the “FY 2014 Agriculture, Rural, FDA Appropriations Bill.” Both hearings will also take place on Thursday, March 14.

REGULATORY ACTIVITY

FDA Meetings on Livestock Antibiotics. FDA has scheduled five public meetings set for this spring to receive comments on the Agency’s implementation of oversight for antibiotics used in livestock production. Meetings will take place on April 9 in Bowling Green, Kentucky; April 23 in Olympia, Washington; May 8 in Fort Collins, Colorado; May 21 in Pierre, South Dakota; and June 4 in College Station, Texas.

Contact Information

For additional insights about likely policy developments, please feel free to contact the author of this section: Dana Weekes at 202-457-6307 or [email protected].

Budget, Appropriations and Sequestration Sequestration Alternative Unlikely. While the FY 2013 appropriations package was considered as

a possible vehicle for a sequestration alternative, no plans have been proposed that are viable for Congressional approval. Last week, agencies began sending letters to grantees advising them of the anticipated sequestration impact on federal programs and an initial wave of furlough notices went out to agency personnel.

FY 2013 Continuing Resolution. Last Wednesday, the House approved a $984 billion FY 2013 appropriations package (H.R. 933) that combines full spending bills for the Departments of Defense and Veterans Affairs with a six-month Continuing Resolution (CR) to fund the remaining departments and agencies.

The Senate will take up the bill this week. Appropriations Chairwoman Barbara Mikulski (D-MD) intends to include at least three additional bills to the package that have been pre-conferenced with House appropriators: Agriculture, Commerce-Justice-Science, and Homeland Security. Chairwoman Mikulski is also negotiating legislative language to provide federal agencies authority to transfer and reprogram funding to help alleviate the impact of sequestration. The goal is to produce a ‘pre-

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approved’ and non-controversial package that both chambers will pass prior to the scheduled start of their two-week recess on March 22. The current FY 2013 CR expires on March 27.

Congressional FY 2014 Budget Resolutions. Senate Budget Committee Chairwoman Patty Murray (D-WA) and House Budget Committee Chairman Paul Ryan (R-WI) will release their proposed FY 2014 Budget Resolutions this week. Chairwoman Murray’s proposal is expected to include a mixture of spending cuts and tax revenue. Chairman Ryan’s proposal is expected to be similar to his FY 2013 “Path to Prosperity” in which he called for lower taxes and cuts to entitlement programs. Chairman Ryan’s plan will work under a timeline to balance the federal budget within 10 years. The Budget Committees are expected to approve the proposals on a party-line vote this week, setting up floor consideration for the week of March 18. As mandated by the fiscal cliff agreement, Congress must complete an FY 2014 Budget Resolution by April 15.

President’s FY 2014 Budget Proposal Pushed Back Again. The latest projected release date for the President’s FY 2014 Budget Proposal is April 8.

Office of Management and Budget Director. Sylvia Matthews Burwell is President Obama’s choice to replace outgoing OMB Director Jeffrey Zients. With early bipartisan support, an easy confirmation is expected for Burwell, who is the current president of the Walmart Foundation and served as the deputy director of the OMB in the Clinton administration.

Contact Information

For additional insights about likely policy developments, please feel free to contact the author of this section: Pam Welsh, at 202-457-6493 or [email protected].

Cybersecurity LEGISLATIVE BRANCH ACTIVITY

Senate Cybersecurity Legislation. Last week, the Senate Homeland Security and Governmental Affairs Committee Chairman and the Senate Commerce, Science and Transportation Committee Chairman, held a joint hearing for the first time in 35 years that focused on implementation of President Obama’s February 12 Executive Order (EO) and the future of cybersecurity legislation. Secretary of Homeland Security Janet Napolitano testified, as well as the Director of the National Institute of Standards and Technology (NIST) Patrick Gallagher. The hearing kicks off what is expected to be a robust legislative session this year with the Senate expected to pursue passage of a comprehensive cybersecurity bill that would address a host of issues including information sharing, liability protections, and FISMA reform.

Cyber Intelligence Sharing and Protection Act. House Intelligence Committee Chairman Mike Rogers (R-MI) and Ranking Member Dutch Ruppersberger (D-MD) continue their efforts to garner support for the Cyber Intelligence Sharing and Protection Act (CISPA), which they hope to bring to the House floor for consideration in April. An identical CISPA bill previously passed the House last


April, despite a veto threat issued on the bill from the White House. Although House leaders have expressed their desire to bring several cybersecurity bills to the House floor at the same time (similar to the strategy used in the last Congress), Chairman Rogers stated that he is not willing to delay floor consideration of CISPA if the other cybersecurity proposals are not ready.

Chairman Rogers and Ranking Member Ruppersberger continue to work with the White House and privacy interest groups to address concerns about the lack of privacy protections included in the bill. Many of these discussions are focused on whether companies should be required to remove personally identifiable information from cyber threat data that they share with the federal government. Two strong critics of CISPA, House Homeland Security Committee Ranking Member Bennie Thompson (D-MS) and Ranking Member of the Committee’s cybersecurity panel Yvette Clarke (D-NY), argued in a letter last week that CISPA includes provisions that fall within the House Homeland Security Committee’s jurisdiction. They would like to see the House Homeland Security Committee consider the CISPA legislation before it moves to the House floor.

Upcoming Hearings. Several cybersecurity-related hearings are expected in the coming weeks, including the following:

o Cyber Command Hearing. On Tuesday, March 12, the Senate Armed Services Committee will hold a hearing titled " Oversight: U.S. Strategic Command and U.S. Cyber Command.” General C. Robert Kehler, Commander of U.S. Strategic Command, and General Keith Alexander, Commander of U.S. Cyber Command, are scheduled to testify at the 9:30am hearing.

o Department of Homeland Security (DHS) Cybersecurity. Due to inclement weather last week, the House Homeland Security Committee postponed its hearing titled “DHS Cybersecurity: Roles and Responsibilities to Protect the Nation's Critical Infrastructure.” The Committee rescheduled the hearing for Wednesday, March 13, at 10:00 am.

o Trade Secret Theft Hearing. Chairman of the Senate Judiciary Subcommittee on Crime and Terrorism Sheldon Whitehouse (D-RI) stated his intention to hold a hearing to review the resources that the Department of Justice currently has in place to prosecute cyber criminals that steal American intellectual property and trade secrets. The date and time for this hearing has yet to be scheduled. This follows from a recent report released from the White House on February 20 titled “Administration’s Strategy on Mitigating the Theft of U.S. Trade Secrets.”

Contact Information

For additional insights about likely policy developments, please feel free to contact the author of this section: Amy Davenport, at 202-457-6528 or [email protected].


Defense EXECUTIVE AND LEGISLATIVE BRANCH ACTIVITY

Drones Debate. After Attorney General Eric Holder said, in a letter to Congress, it was unlikely the U.S. would use a drone attack against an American in the United States, but that it was possible in response to an attack on the scale of September 11, 2001, Senator Rand Paul (R-KY) filibustered last Wednesday’s originally scheduled vote to confirm John Brennan as Director of the Central Intelligence Agency. The 13-hour filibuster focused on the Administration’s possible domestic use of drones. Senator Paul claimed victory after the Attorney General issued another letter last Thursday that said the President does not have the authority to use a weaponized drone to kill an American not engaged in combat on American soil. Senate Appropriations Defense Subcommittee Chair Richard Durbin (D-IL) said President Obama has encouraged lawmakers to establish a legal framework to govern the use of lethal drones.

AFRICOM. Senate Armed Services Committee Chair Carl Levin (D-MI) said in a hearing last Thursday with Army General Carter Ham, the outgoing head of Africa Command (AFRICOM), that the Committee had tried to provide the command greater flexibility and broader authorities to respond to “the unique threats faced by your command.” However, the Chairman also recognized that shortages of funds for AFRICOM for the remainder of FY 2013 may grow worse under the sequester. Last Monday, the Senate confirmed General David Rodriguez to replace General Ham as the head of AFRICOM.

This Week’s Hearings:

o Tuesday, March 12: The Senate Armed Services Committee will hold an oversight hearing on the “U.S. Strategic Command and U.S. Cyber Command.”

o Wednesday, March 13: The Senate Armed Services Committee will hold an oversight hearing on “Sexual Assaults in the Military.”

o Wednesday, March 13: The House Armed Services Subcommittee on Military Personnel will hold a hearing on the “Impact of the Continuing Resolution, Sequestration, and Declining Operations and Maintenance Budgets on Military Personnel and Family Related Programs.”

o Wednesday, March 13: The House Armed Services Committee Subcommittee on Intelligence, Emerging Threats and Capabilities will hold a hearing on “Information Technology and Cyber Operations: Modernization and Policy Issues to Support the Future Force.”

o Thursday, March 14: The House Armed Services Subcommittee on Readiness will hold a hearing on “Is Base Realignment and Closure (BRAC) Appropriate at this Time?”


o Friday, March 15: The House Armed Services Committee will hold a hearing on “The Posture of the U.S. European Command and U.S. Africa Command.”

Contact Information For additional insights about likely policy developments, please feel free to contact the author of this section: Stacy Swanson, at 202-457-5627 or [email protected].

Education LEGISLATIVE ACTIVITY

Continuing Resolution and Sequestration Flexibility. As the Senate turns its attention to the FY 2013 Continuing Resolution (CR) and granting flexibility to some Departments and Agencies to better manage sequestered-affected funds, we expect that the Labor-HHS-Education appropriations bill will not be included in the CR, as Senate Republicans have concerns about granting the Departments of Labor, Health and Human Services, and Education flexibility to implement key legislation and programs that have garnered partisan strife, including the Affordable Care Act and Education Department’s signature programs including Race to the Top.

Upcoming Hearings. Several hearings of relevance are scheduled for this week, including:

o Tuesday, March 12: The Senate Health, Education, Labor and Pensions Committee will hold a hearing entitled "Job Corps Budget Shortfall: Safeguarding Workforce Training for America's Disconnected Youth.”

o Wednesday, March 13: The House Education and the Workforce Committee will hold a hearing titled "Keeping College Within Reach: Examining Opportunities to Strengthen Federal Student Loan Programs."

REGULATORY ACTIVITY

No Child Left Behind Waivers. A coalition of nine California school districts, known as the California Office to Reform Education, has requested a waiver from the No Child Left Behind Act (NCLB). The Department of Education has accepted the waiver request, although Secretary of Education Arne Duncan has stated that he would prefer to work with states. Pennsylvania, Texas, and Wyoming have also requested waivers from the Department. Currently, 34 states and the District of Columbia have been approved for NCLB flexibility. In December, Department denied California’s waiver request.

For additional insights about likely policy developments, please feel free to contact the authors of this section: Amy Budner Smith, at 202-457-6154 or [email protected]; and Dana Weekes, at 202-457-6307 or [email protected].



Energy LEGISLATIVE ACTIVITY Interior Nominee. The Senate Energy and Natural Resources Committee considered Sally Jewell’s

nomination to be the next Interior Secretary on Thursday, March 14. Republicans have raised concerns about her lack of public lands policy experience, and questioned whether she would balance competing interests while seeking to reduce regulatory barriers to develop energy on public lands under an “all of the above” energy strategy. Committee members generally praised Jewell’s pledge to both listen to and balance stakeholder interests.

Congressional Hearings. On Wednesday, March 13, a House Science, Space, and Technology Subcommittee will hold a hearing to assess costs and benefits of federal financial support for energy technologies. On Thursday, a House Natural Resources Subcommittee will hold a hearing on “America’s Onshore Energy Resources: Creating Jobs, Securing America, and Lowering Prices;” an Energy and Commerce Subcommittee will receive a progress update on the Chemical Facility Anti-Terrorism Standards Program.

REGULATORY ACTIVITY

Air Standards for Coal/Oil Power Plants. The Environmental Protection Agency has submitted a final air standards rule for new coal- and oil-fired power plants to the White House Office of Management and Budget for regulatory review. The Agency has been “reviewing new technical information associated with the new-source limits for toxics emitted from new power plants under the Mercury and Air Toxics Standards.” Final action is anticipated in April 2013.

Natural Gas Pipelines. Senate Energy and Natural Resources Committee leaders have asked the Federal Energy Regulatory Commission (FERC) for information regarding recent rate investigations into whether pipelines are overcharging their customers for shipping natural gas.

FERC – Small Generators. FERC will host a Small Generator Interconnection Agreements and Procedures workshop on March 27, to discuss the Notice of Proposed Rulemaking issued in January.

FERC – Public Utilities Business Standards. A final rule amending standards for business practices and communication protocols for public utilities will become effective on May 6. Amendments update standards adopted by the Wholesale Electric Quadrant of the North American Energy Standards Board to categorize various products and services for demand response and energy efficiency, and support the measurement and verification of these products and services in organized wholesale electric markets.

http://www.ferc.gov/EventCalendar/Files/20130227124436-RM13-2-000.pdf

http://www.gpo.gov/fdsys/pkg/FR-2013-03-07/pdf/2013-04433.pdf


Contact Information

For additional insights about likely policy developments, please feel free to contact the author of this section: Tanya DeRivi, at 202-457-6504 or [email protected].

Environment LEGISLATIVE ACTIVITY

Fisheries. On Wednesday, March 13, the House Committee on Natural Resources will hold a full committee oversight hearing on the reauthorization of the Magnuson-Stevens Fishery Conservation and Management Act. The Act is the primary statute governing fishing activities in federal waters and expires at the end of FY 2013. This hearing will be the first in a series that the Committee will hold as it begins the process to reauthorize the Act. Last Congress, the Committee held oversight and legislative hearings which included issues related to: annual catch limits; rebuilding of fisheries; using NOAA enforcement funds to acquire fisheries information; requiring decisions on commercial fisheries disaster assistance in a timely manner and requiring transparency for activities and decisions of regional fishery management councils.

Onshore Resources. On Thursday, March 14, the House Committee on Natural Resources, Subcommittee on Energy and Mineral Resources will hold an oversight hearing on America’s onshore energy resources. The Committee aims to focus on both job creation and a reduction in energy prices.

Environment Chairman. House Science, Space, and Technology Committee Chairman Lamar Smith (R-Texas) has announced that Congressman Chris Stewart (R-Utah) will serve as the new Chairman of the Committee’s Subcommittee on Environment. The Subcommittee assists in overseeing the U.S. Environmental Protection Agency (EPA) and scientific issues related to environmental policy and climate change.

REGULATORY ACTIVITY

Renewable Fuels. EPA has issued a final rule identifying additional fuel pathways that meet the biomass-based diesel, advanced biofuel or cellulosic biofuel lifecycle greenhouse gas (GHG) reduction requirements specified in Clean Air Act section 211(o), the Renewable Fuel Standard (RFS) Program. The final rule describes EPA’s evaluation of biofuels produced from camelina (Camelina sativa) oil and energy cane; it also includes an evaluation of renewable gasoline and renewable gasoline blendstocks and clarifies the definition of renewable diesel. This rule becomes effective on May 6, 2013.

Educational Institutions. EPA is soliciting applications for professionals to serve on the National Environmental Education Advisory Council. The National Environmental Education Advisory Council is comprised of representatives from organizations other than the federal government who provide


EPA with advice on environmental education. The Council is intended to provide the EPA with an understanding of the needs of schools, universities, state departments (of education and natural resources) and educational organizations. Applications are due March 25, 2013.

Toxicology. EPA’s Science Advisory Board has announced a public meeting of the Chemical Assessment Advisory Committee (CAAC) to receive a briefing about the Integrated Risk Information System (IRIS) program and changes to the process for developing IRIS toxicological reviews for chemicals. The meeting dates are Tuesday, April 2, 2013 from 9:00 am to 5:00 pm and Wednesday April 3, 2013 from 8:30 am to 1:00 pm. The meeting will be held at the Washington Marriott Hotel, 1221 22nd Street, Washington, DC 20037.

Contact Information

For additional insights about likely policy developments, please feel free to contact the author of this section: Sarah Vilms, at 202-457-5248 or [email protected].

Financial Services

LEGISLATIVE ACTIVITY

Richard Cordray and Mary Jo White to Be Questioned at Nomination Hearing. On Tuesday, March 12, the Senate Committee on Banking, Housing and Urban Affairs will hold a confirmation hearing on the pending nominations of Mary Jo White to be a member of the Securities and Exchange Commission (SEC) and Richard Cordray to be Director of the Consumer Financial Protection Bureau (CFPB). Richard Cordray, who currently serves as Director of the CFPB due to a recess appointment by President Obama, is expected to face questions by the Republican Committee Members regarding the CFPB’s organizational structure and the need for increased transparency at the agency.

House Appropriations Subcommittee to Explore SEC’s Budget. On Tuesday, March 12, the House Appropriations Subcommittee on Financial Services and General Government will hold a hearing on the proposed FY 2014 budget for the SEC. The witness testifying at the hearing will be Carl W. Hoecker, Inspector General of the SEC.

House Financial Services Subcommittee to Address Mortgage Insurance. On Wednesday, March 13, the House Financial Services Subcommittee on Mortgage and Insurance will hold a hearing titled, “Mortgage Insurance: Comparing Private Sector and Government-Subsidized Approaches.” The hearing is part of the House Financial Services Committee’s plans to address overall housing finance reform and its impact on the financial crisis.

House Financial Services Subcommittee to Discuss “Too Big to Fail” Issues. On Thursday, March 14, the House Financial Services Subcommittee on Oversight and Investigations will hold a hearing on the role of the Financial Stability Oversight Council (FSOC) and its role in determining



which institutions are "too big to fail." FSOC is currently in the process of designating banking and non-banking systemically important financial institutions (SIFIs).

Senate Homeland Security & Governmental Affairs Subcommittee to Investigate JPMorgan Chase Whale Trades. On Friday, March 15, the Senate Homeland Security & Governmental Affairs Permanent Subcommittee on Investigations will hold a hearing titled, “JPMorgan Chase Whale Trades: A Case History of Derivatives Risks and Abuses.” The Subcommittee will examine matters relating to credit derivative trades made by the JPMorgan Chase Chief Investment Office. The Subcommittee expects to issue a Subcommittee staff report in conjunction with the hearing summarizing its investigative findings and recommendations. Witnesses will include representatives from JPMorgan Chase and the Office of the Comptroller of the Currency.

House and Senate to Address Potential Changes to the Dodd-Frank Act. On March 7, Senator Richard Shelby (R-AL) introduced two pieces of legislation, S. 450 and S. 451. S. 450 would impose stricter justification and analysis requirements on regulatory agencies before they propose and finalize regulations. S. 451 would be limited to technical corrections to the Dodd-Frank Act. Further, a bipartisan group in the House and Senate introduced a swaps “push-out” legislation that would alter Dodd-Frank Act’s Section 716, allowing federally insured bank units to act as derivatives traders. Separately, on March 14, the House Agriculture Committee will hold a hearing titled, “Examining Legislative Improvements to Title VII of the Dodd-Frank Act.”

REGULATORY ACTIVITY

Federal Advisory Committee on Insurance to Discuss International Developments. On Wednesday, March 13, the Federal Advisory Committee on Insurance (FACI) will meet to discuss various issues, including international developments relevant to the insurance industry and reports from the three FACI subcommittees on affordability and availability of insurance and international regulatory balance.

Contact Information

For additional insights about likely policy developments, please feel free to contact the author of this section: Mara Giorgio, at 202-457-6522 or [email protected].

Health Care LEGISLATIVE ACTIVITY House Energy and Commerce Hearing. The House Committee on Energy and Commerce

Subcommittee on Health will hold a hearing on Wednesday, March 13, on “Obamacare’s Impact on Jobs.”

House VA Hearing. The House Committee on Veterans’ Affairs Subcommittee on Health has scheduled a hearing on Wednesday, March 13, on “Meeting Patient Care Needs: Measuring the



Value of VA Physician Staffing Standards.” The Subcommittee on Oversight and Investigations will also hold a hearing on Wednesday, March 13, titled “Gulf War: What Kind of Care are Veterans Receiving 20 Years Later.” On Thursday, March 14, the Subcommittee will hold a hearing on “Waiting for Care: Examining Patient Wait Times at VA.”

House Oversight Hearing. The House Committee on Oversight and Government Reform has scheduled a hearing on Thursday, March 14, on “Sequestration Oversight: Understanding the Administration’s Decisions on Spending Cuts and Furloughs.”

House Ways and Means Hearing. The House Committee on Ways and Means Subcommittee on Health will hold a hearing on Friday, March 15, on the “Medicare Payment Advisory Commission’s (MedPAC) Annual March Report to Congress.” MedPAC Chairman Glenn Hackbarth will testify.

REGULATORY ACTIVITY

FDA Posts Draft of Five-Year Plan for Benefit-Risk Framework Used to Review Drugs. The Food and Drug Administration (FDA or the Agency) announced the availability of a draft five-year plan describing the Agency’s approach to further developing and implementing a structured framework for benefit-risk assessment in the human drug and biologic review process and the opportunity for public comment on the draft plan. This plan is part of FDA’s commitments that were made as part of the fifth authorization of the Prescription Drug User Fee Act (PDUFA V).

Contact Information

For additional insights about likely policy developments, please feel free to contact the author of this section: Eugenia Edwards, at 202-457-5622 or [email protected].

International EXECUTIVE AND LEGISLATIVE BRANCH ACTIVITY

North Korea. Late last Thursday, the U.N. Security Council (UNSC) unanimously approved new sanctions on North Korea drafted by the United States and China against North Korea. UNSC Resolution 2094 specifically targets cash transfers and luxury items typically purchased by the North Korean leadership. Hours after the UNSC vote, Pyongyang again threatened foreign “aggressors,” saying it would launch a preemptive nuclear strike. North Korea also said the armistice agreement with South Korea would be abrogated, effective Monday– the same day the planned joint U.S.-South Korea military drills are set to commence.

Al-Qaeda. Last Thursday, the U.S. Department of Justice unsealed an indictment against Osama bin Laden’s son-in-law and longtime al-Qaeda spokesman, Sulaiman Abu Ghaith, and revealed he would appear before court in the Southern District Court of New York the next day. While Congressman Peter King (R-NY) called Abu Ghaith’s capture a “significant victory,” Republican Senators Lindsey Graham (SC) and Kelly Ayotte (NH) pledged to fight the Administration’s decision to use U.S. civilian courts instead of sending Abu Ghaith to the U.S. Guantánamo Detention Center in Cuba for


“extended questioning” given his status as an “enemy combatant.” Last Friday, Abu Ghaith entered a not guilty plea and remains in federal custody.

Venezuela. In response to the death of President Hugo Chávez, President Obama said the “United States reaffirms its support for the Venezuelan people and its interest in developing a constructive relationship with the Venezuelan government.” Also last Tuesday, Caracas expelled two U.S. military attachés assigned to the U.S. Embassy, accusing them of being involved in “destabilizing projects.” A State Department spokesman rejected “the Venezuelan government’s claim that the United States is involved in any type of conspiracy to destabilize the Venezuelan government.” Since the Venezuelan constitution requires there be an election within 30 days, the electoral commission announced last Saturday the presidential election will be held April 14.

Syria. Last Tuesday, Secretary of State John Kerry met in Doha with Qatari Prime Minister and Foreign Minister Hamad bin Jassim bin Jaber Al Thani to discuss the international sanctions against the Assad regime, efforts to help the Syrian opposition build unity, and countering Iran’s efforts with Hezbollah and al-Qaeda affiliates inside Syria. The next day, the Arab League asked the Syrian Opposition Coalition (SOC) to assume Syria’s seat in the League, which allows the SOC to participate in the next Arab League Summit in Doha on March 26 and 27. Last week, Syrian rebels – a group called the Martyrs of Yarmouk – detained 21 Filipino U.N. peacekeepers posted near the disputed Golan Heights territory for four days before releasing them near the Jordan border. Last Friday, a U.N. spokesperson said "the mission in the Golan needs to review its security arrangements …."

Middle East Developments. In advance of his trip to Israel and Jordan later this month, President Obama met last week with U.S. Jewish leaders at the White House. The President reportedly moderated expectations for a breakthrough on the Middle East Peace Process and acknowledged that near-term prospects for peace are bleak. Last Monday, Secretary of State John Kerry met with Saudi Arabian Foreign Minister Saud al-Faisal in Riyadh. Topics of discussion included regional security, Syria, Iran, the Middle East Peace Process, and transitions in Egypt, Libya, Tunisia and Yemen.

Africa. In response to Kenya’s Independent Electoral Boundaries Commission’s (“Commission”) presidential election results announcement last Saturday, Secretary Kerry congratulated the Kenyan people for peacefully voting March 4 and urged that any election disputes by handled through the Kenyan legal system. The Commission announced Uhuru Kenyatta clinched 50.1% of the vote to Prime Minister Raila Odinga's 43.4%. Prime Minister Odinga said he will contest the vote outcome in court. In 2011, the International Criminal Court (ICC) indicted Uhuru Kenyatta for crimes against humanity related to the 2007 presidential election. While Kenyatta has not been convicted by the ICC, last week, the ICC granted a request to delay the start date of his trial by three months to July 9.

Last Thursday, Senate Foreign Relations Africa Subcommittee Chair Chris Coons (D-DE) unveiled “Embracing Africa’s Economic Potential,” a report noting the United States “is losing ground and ceding economic opportunities in Africa to competitors … that could lock American companies and interests out of fast-growing African markets for decades to come.”


Trade. The 16th round of the Trans-Pacific Partnership (TPP) negotiations commenced last Sunday in Singapore. The Office of the U.S. Trade Representative confirmed the United States would not table new language related to tobacco regulations in this round. Last week, the United States informally floated a “non-paper” describing a new consultative mechanism for addressing disputes over sanitary and phytosanitary (SPS) measures. The TPP schedule devotes a significant portion to the protection of intellectual property rights, environmental rules, legal and institutional issues, non-conforming measures, and rules of origin. This week, the TPP negotiators will address investment, government procurement, competition, and technical barriers to trade. The 16th round will conclude on Wednesday.

Cabinet Turnover. President Obama welcomed last Thursday’s Senate vote of 63 to 34 that confirmed John Brennan as the new Director of the Central Intelligence Agency.

This Week’s Hearings:

o Wednesday, March 13: The House Foreign Affairs Subcommittee on Asia and the Pacific will hold its second hearing on The Rebalance to Asia: Why South Asia Matters. The Administration is not scheduled to testify.

o Thursday, March 14: The House Foreign Affairs Subcommittee on Western Hemisphere will hold a hearing on Enhancing Partnerships with Mexico and Canada. The Administration is not scheduled to testify.

Contact Information

For additional insights about likely policy developments, please feel free to contact the author of this section: Stacy Swanson, at 202-457-5627 or [email protected].

Tax LEGISLATIVE ACTIVITY

President and Republicans Renew Grand Bargain Talks. The President dined Wednesday night with twelve Republican Senators to renew hopes for a “grand bargain” deficit reduction package. The President is likely seeking to replace the 10-year, $1.2 trillion in sequester cuts that went into effect on March 1 with a package that includes revenue increases.

The Republicans who attended, at least publicly, expressed encouragement with the President’s outreach, though skepticism about whether any deal can be reached remains high. With Congressional Republican leaders Mitch McConnell (R-KY) and John Boehner (R-OH) staunchly against additional revenues, the President may be looking to work with other Republicans such as Tom Coburn (R-OK) and Saxby Chambliss (R-GA) who are part of a bipartisan group that have previously supported a deficit-reduction plan that included additional revenues in exchange for significant long-term reduction in future spending, namely entitlement reform.



Next week, the President will continue his discussion with lawmakers over a lunch with Senate Republicans, while separate meetings with House Republicans and House Democrats are also being scheduled.

Senate Finance to Hold Series of Tax Meetings. Senate Finance Committee Chairman Max Baucus (D-MT) is planning to hold a number of closed-door Committee meetings on tax reform over the next few months, perhaps starting before the Senate recesses for the Easter break on March 22. The meetings will occur on a weekly basis, and are intended to facilitate discussion among Senators in an attempt to find where agreement on policy exists. The sessions are expected to include discussion on most major policy elements of tax reform. In the House, work is progressing in the Ways and Means bipartisan working groups. Once these working groups have completed their analysis, the Joint Committee on Taxation (JCT) will prepare a report for the full Committee, due by April 15, 2013.

Small Business Tax Reform Draft Postponed. On Wednesday, March 6, the House Ways and Means Committee postponed the release of draft tax reform legislation for small businesses. Look for the proposal to possibly be released next week.

Committee Republicans said to expect that the legislation will simplify the tax code as it relates to small passthrough corporations. This will again move the Republicans closer to a more comprehensive reform package, joining other tax reform legislation drafts on international taxation and the taxation of financial products.

Roundup of Tax Hearings. Last Tuesday, the Subcommittee on Oversight of the House Committee on Ways and Means held a hearing to discuss the tax-related provisions of the Affordable Care Act (ACA). Particular attention was paid to the medical device excise tax, with some panelists arguing the excise tax is designed to avoid incentives to move production overseas by taxing revenue from imported devices, but not exported devices, and that the industry is rightly targeted because it is expected to experience increased business as the ACA pushes more consumers into the healthcare market. Other panelists and Republican representatives argued that the excise tax burdens small and emerging businesses by taxing revenues rather than profits, and pushed back on the suggestion that the ACA will lead to an uptick in business, arguing no such uptick has occurred in Massachusetts where universal healthcare has been in place since 2006.

Also on Tuesday, the Senate Budget Committee held a hearing to discuss strategies for reducing the deficit by eliminating wasteful spending in the tax Code. Discussion focused primarily on corporate taxation as well as on the Code’s disparate treatment of higher and lower income individuals. Specific tax expenditures mentioned during the hearing included: deferred taxation of overseas income, tax exempt bond finance, carried interest taxation, and the charitable deduction. Committee Democrats expressed near unanimous support for the concept of raising revenue through the elimination of tax expenditures. Conversely, the majority of Republicans voiced skepticism about the proposal and emphasized their support for broad based spending cuts in lieu of tax increases

Tax Hearings This Week. The following tax hearings are scheduled in the House Ways and Means and Senate Finance Committees this week:


o Thursday, March 14: House Ways and Means hearing on Financing Challenges Facing the Social Security Disability Insurance Program.

o Wednesday, March 13: House Ways and Means hearing on U.S.-India Trade Relations: Opportunities and Challenges.

Contact Information

For additional insights about likely policy developments, please feel free to contact the author of this section: Joe Urso at 202-457-5349 or [email protected].

Transportation and Infrastructure FY 2013 Funding. Last Wednesday, the House passed a continuing resolution (CR) to fund the

remaining six months of the fiscal year. Although the Office of Management and Budget (OMB) requested that the final FY 2013 CR fully fund transportation programs at the levels authorized by the Moving Ahead for Progress in the 21st Century Act (MAP-21) (P.L. 112-141), the House-passed CR does not increase the obligation levels. The funding levels proposed in the CR instead reflect a $742 million reduction below the MAP-21 levels in FY 2013 (including $555 million for highways and $117 million for transit).

In response, Senators Barbara Boxer (D-CA), Chairman Environment and Public Works (EPW) Committee; Tim Johnson (D-SD), Chairman of the Banking, Housing and Urban Affairs Committee; and Jay Rockefeller (D-WV), Chairman Commerce, Science and Transportation Committee, sent a letter asking House Speaker John Boehner (R-OH) to honor the funding levels agreed to in MAP-21. The House bill also did not include a number of additional “anomalies” or targeted fixes to prior year language requested by OMB, including one that would strike problematic carry-over language from the FY2012 New Starts appropriation and provide FTA with discretion as to how to allocate the entire appropriated amount. Senate appropriators considered attaching a full-year transportation appropriations bill to the House-passed CR to make these and other changes, but that appears to have hit a wall over language prohibiting the appropriation of high speed rail funding for the California High Speed Rail project. If that holds true, attention in the Senate will focus on making a set of targeted fixes to the THUD portion of the CR, potentially including the obligation levels. Senate Democrat’s ability to push on these issues, however, is tempered by the need for bi-partisan agreement in the Senate as well as the recognition that moving a CR through the Congress and avoiding a government shutdown is the pre-eminent priority. Senate Appropriations Chairman Barbara Mikulski (D-MD) is expected to unveil the text of her proposed CR on Monday with votes anticipated as early as Wednesday, March 13.

TIGER Funding. The House CR continued funding for the TIGER discretionary grant program. Given the strong support for TIGER in the Senate, there will almost certainly be another round of TIGER grants in FY 2013. The TIGER program received $500 million in FY 2012. Funding for the FY 2013 program would be subject to sequestration, yielding a five percent reduction in the program



funding level. Once full year appropriations are finalized for the TIGER program, USDOT can be expected to move forward quickly in issuing a Notice of Funding Availability (NOFA).

MAP-21 Implementation Hearing. The House Transportation and Infrastructure Subcommittee on Highways and Transit has scheduled a hearing for Thursday, March 14, titled “MAP-21: Progress Report from U.S. DOT Modal Administrators.”

WRDA Reauthorization. Chairman Boxer expects EPW to mark up a bill reauthorizing the Water Resources and Development Act (WRDA) within the next couple of weeks. While a draft of the new Senate WRDA bill negotiated with Ranking Member David Vitter (R-LA) has not been made public, Chairman Boxer has indicated it will differ in significant respects from the draft legislation she released in the last Congress. House Transportation and Infrastructure Committee Chairman Bill Shuster (R-PA) continues to view WRDA as a top priority for the Transportation and Infrastructure Committee. The Chairman has said that he and his staff are meeting with stakeholders and working towards draft legislation, but will not be releasing anything or moving forward before EPW.

Contact Information

For additional insights about likely policy developments, please feel free to contact the authors of this section: Jessica Monahan at 202-457-6302 or [email protected] and Jared Fleisher at 202-457-6341 or [email protected].



capital thinking ~ march 11, 2013

Documents

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cyber intelligence sharing

rules committee print

affordable care act

house appropriations subcommittee

environmental protection agency

house agriculture committee

north korea