Congressional Outlook 2008 | January 21, 2008 Issue - Vol. 86 Issue 3 | Chemical & Engineering News
Volume 86 Issue 3 | pp. 35-41
Issue Date: January 21, 2008

Congressional Outlook 2008

Democratic leadership still faces legislative bottlenecks as elections overshadow this year's efforts
Department: Government & Policy
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THE SECOND SESSION of the 110th Congress starts in somewhat better shape than the first session, at least with respect to the federal budget. Democrats, who had just eked out a slim majority in the House and Senate in 2007, managed to complete passage of the federal budget late last year before adjourning, even though it was with a huge omnibus bill covering all the government—except the Defense Department—instead of individual appropriation bills. But the very small majority held by the Democrats continues to make it difficult to pass anything controversial, and that problem will become even more acute in this election year.

Aside from the tough job of trying to pass a budget for fiscal 2009, major issues before Congress this year will look familiar. Energy policy, especially taxes, will be debated again, as will how the nation can respond to the challenge of global climate change. Food safety reforms, which got off to a strong start last year, will focus on more changes at the Food & Drug Administration. Other safety questions focusing on imports of drugs and consumer products will be the subject of hearings this year, as Congress has voiced its concern over reports on unsafe toys and counterfeit drugs from overseas.

The national elections will overshadow a lot of legislation as members try to show that they are effective while not doing anything that will be controversial. The prospect of a new president in the following year often means that Congress will hold off doing anything more than it absolutely has to in anticipation of being in a better position after the election. Huge national concerns such as funding for the war in Iraq and changes in homeland security will be debated, but substantive changes cannot be expected.

So as with most recent Congresses, progress this year will be slow. And because most second sessions are continuations of the first, this year in Congress looks as if it will follow suit. Following is C&EN's annual outlook of what to expect from Congress in the months ahead.

ECONOMY & BUDGET. The tax credit that rewards companies for conducting research and development work in the U.S. expired on Dec. 31, 2007, but congressional leaders, including House Ways & Means Committee Chairman Charles B. Rangel (D-N.Y.) and Senate Finance Committee Chairman Max Baucus (D-Mont.), promise to revive it early in 2008. This marks the 13th time the credit has expired since it was enacted in 1981. The incentive is claimed annually by more than 11,000 companies to offset some of their R&D costs.

"There is broad, bipartisan agreement among both chambers of Congress and the President that the credit should be strengthened and extended," says Monica McGuire, senior policy director for taxation at the National Association of Manufacturers. Nevertheless, companies that would use the credit cannot assume it will be restored for the purposes of financial reporting. The Democrats' budget rules require lawmakers to offset new tax cuts with a separate tax increase or spending cut.

"For R&D-intensive companies, this is an immediate $8 billion tax increase,'' says McGuire, who is also executive secretary of the R&D Credit Coalition, a group of more than 100 trade associations and companies that are urging lawmakers to pass a seamless multiyear extension of the tax break.

The coalition estimates the credit is worth on average 6 cents of every dollar spent on research. The group supports legislation (H.R. 2138) introduced last year by Reps. Sander Levin (D-Mich.) and Dave Camp (R-Mich.) that would permanently extend the 20% tax credit for all qualified U.S.-based R&D expenditures. Baucus is sponsoring a similar bill (S. 41).

Failure to renew the tax credit will hurt bioscience companies making their research decisions for 2008 and beyond, says James C. Greenwood, president of the Biotechnology Industry Organization. "I am concerned that an expired credit will put U.S. companies at a disadvantage relative to those firms in countries with long-term research incentives," he remarks. "For research-intensive bioscience and medical technology companies, particularly those that must raise funds in capital markets, this could seriously impact their position in the marketplace."

Beyond the R&D tax credit, American Chemistry Council Tax Director Stephen Elkins expects Congress will begin laying the groundwork to reform the corporate tax structure. "Taxes are likely to emerge as a larger policy issue and a greater concern for ACC member companies than they have been in recent years," he says.

It has become obvious to lawmakers that they need more revenue than the current tax regime is providing, Elkins notes. "They are looking at health care, entitlements, and a number of other issues that simply will require more and more revenue as we go forward," he says. "As a consequence, there are very serious policy discussions under way about what the U.S. business tax regime should look like."

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Elkins anticipates that hearings will be held throughout the year on a comprehensive tax-reform package (H.R. 3970), introduced by Rangel on Oct. 26, 2007. Among other things, the legislation would lower the corporate tax rate but abolish various tax breaks for manufacturers. "The American people expect the executive branch to work with Congress to reform our complicated and ineffective tax code, and I believe we can reach some type of agreement on this critical issue," Rangel said in a statement. Elkins calls the measure "a very far-reaching and innovative proposal," but he worries that "some provisions could be very difficult for the chemical industry."

The congressional discussion on tax reform will also focus on a 116-page report published by the Treasury Department on Dec. 20, 2007, that details several options for overhauling the corporate tax code but makes no recommendations. "It is a highly nonpolitical document that analyzes the alternatives and underscores the fact that increasingly, the U.S. tax regime makes U.S.-based global businesses less competitive against our trading partners," Elkins explains.

The industry official is concerned that proposals for changes in the tax system "ultimately could have a negative effect on earnings within the U.S. chemical industry." Although it's unlikely that the Democratic Congress and President George W. Bush will strike a deal on tax reform, the stage could be set for action in 2009 when a new Administration takes office.

HOMELAND SECURITY. The House Homeland Security Committee is expected to introduce a permanent chemical plant security bill later this month or early next month. Chairman Bennie Thompson (D-Miss.) aims "to get a bill to the President before the election," says Rick Hind, legislative director of the Greenpeace Toxics Campaign.

Because of the foreshortened legislative calendar, says P. J. Crowley, director of homeland security at the Center for American Progress, "it will take some heavy lifting in the House and Senate if this legislation is passed this year."

Congress passed chemical security legislation in 2006 that gave the Department of Homeland Security (DHS) temporary authority to issue regulations, which the department did in 2007. That authority expires in 2009.

The 2006 legislation was silent on inherently safer technology (IST)—more benign chemicals and safer processes—and allowed for federal preemption, meaning states could not enact standards stronger than those DHS promulgated.

The draft bill Thompson released at his committee hearing last October addressed those two items but not as vigorously as Hind and others would like. Hind expects the final bill "will beef up the draft's IST provision and resolve the preemption issue."

The chemical industry made clear at the hearing its approval of the 2006 legislation and DHS's 2007 regulations. Industry would like to give the regulations enough time to work before DHS is given new mandates in a permanent chemical security bill.

Crowley believes that Thompson's effort should receive the greatest urgency because "chemical security is, in my mind, the most significant vulnerability we confront." But he is concerned that DHS doesn't have the personnel or budget to "execute requirements already on the books," and not just in the arena of chemical security but in border, port, and aviation security as well.

In fact, Crowley believes "the fundamental challenge for Congress is to make sure DHS continues to do what needs to be done and has the capacity to do it." For many reasons, most of the sources C&EN contacted believe this congressional session will be low key about everything, including homeland security. Congress, they say, will tie loose ends but pass no dramatic security legislation.

James J. Carafano, senior research fellow at the Heritage Foundation, agrees. "I don't think this will be a super activist year for any regulation." He does, however, think Congress "will make a serious effort to front-load appropriations bills," including one for DHS, so it won't be accused by voters of being a do-nothing Congress.

Carafano believes the Senate Homeland Security & Governmental Affairs Committee will make its "first serious effort to craft a DHS authorization bill" to give the department policy guidance. In the past, the House passed a DHS authorization bill, but the Senate, even in committee, never considered one.

Leslie Phillips, spokeswoman for the Senate homeland security panel, says the committee will take up an authorization bill only if it has the time to do so. She says the committee's central effort will be to "undertake a broad inquiry into the federal government's preparedness for nuclear terrorism." The committee will also investigate Islamic radicalization and the Internet, the role of private contractors in a war zone, and how a Mexican national with tuberculosis was able to enter the U.S.

CHEMICAL WEAPONS. The never-ending saga of the destruction of chemical weapons continues this year, albeit with a strong focus on budgetary matters.

To date, the Army has destroyed over 52% of the country's 31,500-ton chemical arsenal. Several years ago, the Army projected it would not be able to destroy the entire U.S. stockpile until 2023, fully 11 years after the Chemical Weapons Convention's deadline of 2012.

Congressional delegations from Colorado and Kentucky, whose stored stocks were not slated to be destroyed until 2020 and 2023, respectively, were successful in changing the 2023 deadline. They inserted language in the fiscal 2008 Defense appropriations bill that mandates a 2017 deadline. The new directive means the Pentagon will have to revise its funding profile for chemical weapons destruction to take into account the earlier deadline.

The stockpiles in Colorado and Kentucky are to be destroyed under the Army's Assembled Chemical Weapons Alternatives program, which is part of the Army's Chemical Demilitarization program.

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Craig Williams, executive director of the Chemical Weapons Working Group, expects that President Bush's 2009 budget request "will reflect the Pentagon's funding modifications in line with the 2017 directive." Those modifications will then be taken up by the House and Senate Defense Appropriations Committees this year.

The question, Williams says, is whether the chemical demilitarization budget will be increased substantially above the current $1.5 billion to take into account the increased costs of speeding destruction in Colorado and Kentucky. If the budget is increased significantly, none of the other six stockpile sites whose arsenals are slated to be destroyed well before 2017 should suffer any consequences of the 2017 deadline, he says. If the budget isn't increased, he explains, money to pay for accelerated destruction in Colorado and Kentucky will have to come from funds budgeted for destruction of weapons at the other six sites.

ENERGY. Because energy is of interest to so many U.S. industries and individuals, it is likely to appear in parts of bills or in legislation tailored to a particular sector or need this year. It is unlikely, however, to be the topic of a stand-alone bill, because Congress passed, and President Bush signed, a multifaceted, 300-plus-page energy bill just a month ago.

In late summer of last year, several members of Congress predicted two energy bills would be up for debate in the near future: a short bill addressing a limited number of topics to be taken up and passed quickly, and a more complex bill dealing with climate change, vehicle fuel-efficiency standards, and a multitude of thorny issues that would require more discussion and would be addressed in 2008.

Instead, in the waning days of 2007, House and Senate leadership hammered out a bill that established the first new vehicle fuel-efficiency standards in 22 years, required production of 36 billion gal of biofuel by 2022, and included a host of new efficiency standards as well as a phaseout of the incandescent light bulb. The President has since signed this bill into law.

The battle for passage was hard-fought, and several far-reaching provisions were jettisoned to get enough votes to clear the bill. This was particularly true in the Senate, where Democrats have but a single vote more than Republicans and a 60-vote supermajority is needed to overcome a filibuster that could have tied up the bill.

Two provisions that appeared in the House-passed bill but were dropped by Senate Democratic Party leadership to gain Republican support would have shifted some $13 billion in tax breaks from oil and gas companies to renewable energy providers and would have required 15% of U.S. electricity to come from renewable energy sources.

Senate staffers say at least some of the parts left out of the Senate-passed bill may make their way into legislation this year. Not likely to be revisited, however, are the oil and gas tax provisions, which were the center of a bruising battle that occurred last time around.

Support for renewable electricity, on the other hand, is strong. Sen. Jeff Bingaman (D-N.M.), who chairs the Senate Energy & Natural Resources Committee and has been a longtime supporter of renewable energy, is likely to find a way to put into law the requirement that a percentage of U.S. electricity come from renewable energy. Committee staffers note the House supports the provisions related to renewable energy and some 22 states have laws requiring renewable electricity generation.

One vehicle to encourage renewable energy could be congressional action to extend provisions that grant production tax credits for wind, solar, and other favored energy sources, which will expire by year's end. The extensions also provide an opportunity to reconsider energy provisions of all stripes.

Other possible energy actions include oversight hearings in both the House and the Senate. The House Energy & Commerce Committee has already said it will begin the year with a comprehensive review of the Nuclear Regulatory Commission's operations due to recent reports of security guards sleeping while on duty at the Exelon Peach Bottom nuclear power plant in Pennsylvania. The investigation will be broad, committee staffers say, and encompass more than security. It is likely to include an examination of the commission's ability to issue new licenses to currently operating plants, as well as a look at whether the agency has the resources to process and assess utility applications for a new generation of plants, which could exceed 30 filings.

ENVIRONMENT. With 17 international meetings having a primary focus on global warming already scheduled for 2008, climate change is not likely to fall off anyone's agenda this year. Because of this scrutiny, climate-change legislation will undoubtedly receive attention in the upcoming Congress. Last fall, a group of senators led by John W. Warner (R-Va.) and Joseph I. Lieberman (I-Conn.) introduced a massive bill, America's Climate Security Act (S. 2191), that combines elements of 12 previous climate-change proposals and would affect nearly every segment of the U.S. economy. The Senate Environment & Public Works Committee approved the measure by a vote of 11-8 in December, and Sen. Harry M. Reid (D-Nev.) has expressed a commitment to bring it to the Senate floor this year.

The bill would restrict greenhouse gas emissions from power plants, petroleum refineries, major manufacturers, and natural gas suppliers under a cap-and-trade mechanism. The government would establish a cap on total emissions and then auction off emission allowances or give allowances to the affected industries. The bill preserves the right of states to implement their own solutions to global warming as long as their rules are as stringent as or more stringent than the federal law. The measure would reduce total emissions by 62 to 66% of the 2005 level by 2050.

Rep. John D. Dingell (D-Mich.), chair of the Energy & Commerce Committee, has issued one white paper on what shape a national climate-change bill should take and will issue another on international aspects of climate-change legislation by mid-February. He will hold hearings on issues raised in the white papers before he and other lawmakers draft legislation, which is expected to be similar to S. 2191, according to his staff.

Republican lawmakers, however, have said they will block climate-change legislation until the Environmental Protection Agency and the Department of Energy's Energy Information Administration analyze its economic impacts. Even if both the House and the Senate pass legislation requiring greenhouse gas cuts, some observers expect President Bush to veto it, because so far he has shown no sign of wavering from his commitment to voluntary measures.

Congress is also likely to focus significant attention this year on EPA's late-December 2007 decision to reject California's plan to control greenhouse gas emissions from new cars and trucks. After spending two years studying the state's plan, EPA Administrator Stephen L. Johnson denied California's request just hours after the President signed a new energy law. Johnson said he rebuffed the California plan because the law, which requires new vehicles to meet a 35-mpg average fuel economy by 2020, creates a "national solution" to reduce greenhouse gas emissions from cars and trucks.

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The Senate Environment & Public Works Committee and the House Oversight & Government Reform Committee, both chaired by Californians, have launched investigations of the decision. Both panels want to determine whether Johnson disregarded recommendations from EPA legal and technical staffs that allegedly favored approval of the California plan. The committees are likely to call Johnson to testify about his decision, which is the focus of a challenge that California, backed by 12 other states, filed in federal court earlier this month.

Meanwhile, the Senate is poised to vote on a bill (S. 595) that would restore the amount of information that industrial facilities provide to the public about their chemical releases under EPA's Toxics Release Inventory. EPA relaxed the reporting requirements in late 2006, allowing many facilities to provide less data than they have had to in the past. The Government Accountability Office, the investigative arm of Congress, recommended that legislators overturn the EPA action, saying the agency's move takes a serious bite out of community right-to-know information while providing only small savings to industry. The Senate Environment & Public Works Committee approved S. 595 in July 2007 along party lines.

The House Energy & Commerce Committee's Subcommittee on Environment & Hazardous Materials in October 2007 held a hearing on a similar bill to restore right-to-know reporting requirements (H.R. 1055) but has not taken a vote on the measure.

In 2007, the House voted to ban U.S. exports of elemental mercury, and the Senate passed a bill that would ban most uses of asbestos but would exempt asbestos diaphragms used in chlor-alkali production. Both measures could end up on President Bush's desk if congressional leaders choose to work on them before the election season is in full swing.

In addition, the Senate Environment & Public Works Committee will hold hearings this year on a muddy decision from the Supreme Court on the Clean Water Act, says Sen. Barbara Boxer (D-Calif.), who chairs that panel. The court's splintered 4-1-4 decision in 2006 makes it unclear whether certain stretches of streams that do not flow year-round remain federally protected from unfettered discharges of pollutants. Many industrial facilities currently have Clean Water Act permits to discharge wastewater into these waterways, which are called intermittent streams.

PRODUCT & FOOD SAFETY. Recalls of toys, primarily because of contamination with lead and the presence of a date-rape-drug precursor on some bead coatings, have led to several bills that would strengthen the Consumer Product Safety Commission (CPSC) and mandate more stringent safety standards for toys. Improving toy safety is certain to remain a major issue of legislative concern in 2008.

In late December, the House passed H.R. 4040 by a voice vote of 407-0. The bill would authorize an increase in CPSC's budget from about $65 million in fiscal 2008 to $80 million in fiscal 2009, $90 million in 2010, and $110 million in 2011. The legislation also requires tougher lead standards for the manufacture of children's products, mandates independent toy testing, and, to facilitate recalls, requires manufacturers to put tracking labels on all toys for children 12 years and under.

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The Senate Commerce, Science & Transportation Committee approved a similar bill (S. 2045) on Oct. 30, 2007. In some ways, the Senate bill is stronger than H.R. 4040. It would fund CPSC through fiscal 2015, increasing annual funding to $141 million by 2015. It also sets a more stringent standard than the House version for lead in paint that is used on children's toys.

Rep. Rosa L. DeLauro (D-Conn.), chair of the House Agriculture, Rural Development, FDA & Related Agencies Appropriations Subcommittee, praises the House bill but believes it doesn't go far enough. She says it contains loopholes, such as allowing manufacturers to do their own product testing. And she says there are still too many exemptions allowing lead in some children's products. "I look forward to making this bill stronger, working through the conference to address its shortcomings," she says.

Given the intense public interest in improving toy safety, the Senate version of the legislation is likely to pass this year and could well be enacted into law.

Food safety will get a lot of congressional attention as well. Because of the number and severity of food recalls in the past few years, Congress is likely to once more turn its attention to creating a single agency that combines all the food safety functions within the Department of Health & Human Services (HHS). DeLauro plans to introduce a Food Safety Modernization Act this year. The new agency the act would set up would take over the food safety functions of FDA and the Department of Agriculture and have authority to inspect foreign food producers that export to the U.S. Many other members of Congress share DeLauro's concerns and want to change the fragmented system of food safety regulation now in place.

DRUG POLICY. Sen. Edward M. Kennedy (D-Mass.) is working to increase FDA's budget, in part to enhance its capacity to protect Americans from unsafe food. The food safety resources at FDA need to be doubled over five years, he says.

Congress may make another attempt to complete legislation to reduce the prices that the government pays for drugs under Medicare. Last year, the House passed H.R. 4, which would give the government power to negotiate drug prices for the Medicare drug benefit. The Department of Veterans Affairs already has this authority and pays lower prices than those generally available under Medicare Part D.

The Senate Finance Committee passed a bill (S. 3) in 2007 that is similar to H.R. 4, but the measure never gained enough support in the full Senate to overcome a filibuster. Both the pharmaceutical industry and the Bush Administration adamantly oppose such legislation.

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Another pharmaceutical controversy Congress will be investigating is the misuse of prescription drugs in nursing homes and the overarching issue of whether Medicaid and Medicare are paying for drugs for unapproved uses. Sen. Charles E. (Chuck) Grassley (R-Iowa), ranking member of the Finance Committee, has asked the inspector general for HHS to review how antipsychotic drugs are being used off-label in nursing homes for dementia. In a letter, he asks the IG Office to investigate reports that 21% of nursing-home patients receive such drugs.

In a separate letter to FDA Commissioner Andrew C. von Eschenbach and Center for Medicare & Medicaid Services Acting Commissioner Kerry N. Weems, Grassley says FDA has taken regulatory action against some unapproved uses of drugs, but such drugs continue to be used for unapproved purposes and Medicaid is paying for them.

To help counter off-label prescribing of drugs, Grassley has sponsored the Physicians Payments Sunshine Act, S. 2029, which would require drug and medical device makers to report all gifts of over $25 given to physicians, clinicians, and prescribers. These are often intended to influence unapproved use of drugs. The gifts would be registered on a publicly accessible national database.

TRANSPORTATION. Martin J. Durbin, ACC managing director of federal affairs, says the industry group's transportation agenda this year will focus on efforts to pass legislation designed to increase competition in the freight railroad industry, which has undergone massive consolidation during the past 25 years.

"Our companies continue to see deterioration in service, as well as an increase in rates," Durbin notes. One measure supported by ACC would eliminate rail carriers' long-standing exemptions from the nation's antitrust laws, and another would help ensure that "captive" shippers in areas served by only one railroad have access to competitive pricing and service.

"We saw some positive movement in 2007, with legislation moving forward in both the House and the Senate," Durbin observes. The antitrust bill (S. 772) is awaiting a vote on the Senate floor, and the competition legislation (H.R. 2125) is expected to advance out of the House Transportation & Infrastructure Committee early this year.

SCIENCE POLICY. Proponents of legislation to fundamentally overhaul U.S. patent law hope to regain momentum and win Senate approval of a reform measure that has been stalled since sailing through the House last year. Technology companies such as Microsoft, Apple, and Oracle say major reform is needed to curb an explosion in frivolous patent litigation and to put a limit on skyrocketing damage awards.

The House passed the Patent Reform Act of 2007 (H.R. 1908) by a comfortable margin on Sept. 7, 2007, but the measure fell off the congressional fast-track when organized labor joined the biotech, manufacturing, and pharmaceutical industries in voicing concerns. Drugmakers fear that the proposed changes would lessen the value of their patents, whereas labor groups charge that the bill would leave U.S. companies and workers more vulnerable to foreign competitors.

The Senate Judiciary Committee approved its version of the measure (S. 1145) on July 19, 2007, but Chairman Patrick J. Leahy (D-Vt.), a lead sponsor, has repeatedly stressed that the legislation is a work in progress. In a discussion with colleagues on the Senate floor in late December, Leahy noted that "many changes have been made to improve and perfect the bill." But he acknowledged that a number of Judiciary Committee members have "expressed a strong view that the bill should be further perfected" before it comes to a vote by the full Senate.

Leahy said he intended "to seek and hear the views of any and all parties and to include all interested staff and senators," while asserting that "this will continue to be an open and deliberative process, with the goal of favorable Senate action as early as the floor schedule permits."

Congress is also expected to take up legislation related to nanotechnology. One item on the agenda of committees in both the House and Senate is reauthorization of the National Nanotechnology Initiative (NNI). Hearings on this topic are likely in the House Science & Technology Committee and the Senate Commerce, Science & Transportation Committee.

The environmental, health, and safety (EHS) impacts of nanotechnology will continue to receive congressional attention both independently and as part of NNI's reauthorization. In addition to the committees dealing with the reauthorization, the House Energy & Commerce Committee's Subcommittee on Environmental & Hazardous Materials will be looking into the gaps in the current statutory and regulatory framework that govern EHS impacts.

Another priority in the House Science & Technology Committee and the Senate Commerce, Science & Transportation Committee will be the reauthorization of the National Aeronautics & Space Administration. The agency will face some tough questions about its ambitious timeline for completing the construction of the international space station, retiring the space shuttle, and beginning its lunar missions. The distribution of funds away from Earth-observing satellite programs is also expected to be on the agenda.

Both houses are expected to build on the America Competes Act, which aims to make the U.S. more competitive in the global marketplace by bolstering federal R&D in science. The bill was passed with much fanfare last summer. The House Science & Technology Committee plans to hold hearings looking at funding issues and at what new programs need to be set up to ensure the law's impact is maximized.

Legislation to open up federal support for stem cell research is expected to come up again this year. Although stem cell research is not as high of a priority as it was last year, Reps. Diana DeGette (D-Colo.) and Michael N. Castle (R-Del.), among other members of Congress, remain committed to get legislation passed that will reverse the President's policy limiting the stem cell lines available for study using federal funds and provide appropriate oversight. Such a bill has cleared Congress twice, but it has been vetoed by the President both times.

 
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