Capital Thinking ~ June 3, 2013

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June 3, 2013

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Capital Thinking: Contents General Legislative ....................................................................................................... 3 Agriculture and Food .................................................................................................... 3 Budget and Appropriations .......................................................................................... 4 Cybersecurity ................................................................................................................ 4 Defense .......................................................................................................................... 5 Education ...................................................................................................................... 7 Energy ........................................................................................................................... 7 Environment .................................................................................................................. 9 Financial Services ....................................................................................................... 10 Health Care .................................................................................................................. 11 Homeland Security...................................................................................................... 13 Immigration ................................................................................................................. 15 International ................................................................................................................ 16 Tax ............................................................................................................................... 19

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General Legislative The Senate will convene today, Monday, June 3, at 2:00 pm and begin a period of morning business. Thereafter, the Senate will resume consideration of S. 954, the Farm Bill, provided that alfalfa amendment S.A. 987, offered by Senator Jerry Moran (R-KS) and food aid amendment S.A. 1079, offered by Senator Chris Coons (D-DE) will be in order, and that the Senate will proceed to votes on those amendments at 5:30 pm.

Today, Monday, June 3, the House will meet at 2:00 pm for legislative business, and votes will be postponed until 6:30 pm. Legislation Considered Under Suspension of the Rules will include: (1) H.R. 1919 – Safeguarding America’s Pharmaceuticals Act of 2013, as amended; (2) S. 622 – Animal Drug and Animal Generic Drug User Fee Reauthorization Act of 2013; (3) H.R. 126 – Corolla Wild Horses Protection Act; (4) H.R. 1206 – Permanent Electronic Duck Stamp Act of 2013; and (5) H.R. 885 – San Antonio Missions National Historic Park Boundary Expansion Act of 2013.

On Tuesday, June 4 and Wednesday, June 5, the House will meet at 10:00 am for morning hour and 12:00 pm for legislative business. On Thursday, June 6, the House will meet at 9:00 am for legislative business, and last votes are expected no later than 3:00 pm. On Friday, June 7, no votes are expected. Also on the House calendar for the week are (1) H.R. 671 – Ruth Moore Act of 2013 (Suspension, 40 minutes of debate); (2) H.R. 2216 – Military Construction and Veterans Affairs, and Related Agencies Appropriations Act, 2014 (Subject to a Rule); and (3) H.R. 2217 – Department of Homeland Security Appropriations Act, 2014 (Subject to a Rule).

Agriculture and Food LEGISLATIVE ACTIVITY

Farm Bill Timeline. The Senate will resume consideration of the Farm Bill (S. 954) today, Monday, June 3. Two roll call votes are scheduled at 5:30 pm: S.A. 987 (alfalfa crop insurance program) and S.A. 1079 (food aid). Senate Majority Leader Harry Reid (D-NV), Senate Minority Leader Mitch McConnell (R-KY), Senate Agriculture Committee Chairwoman Debbie Stabenow (D-MI), and Senate Agriculture Committee Ranking Member Thad Cochran (R-MS) are expected to unveil an amendment package today or tomorrow, Tuesday, June 4. A final vote on the Farm Bill could likely take place later in the week.

The House is expected to consider the Farm Bill on the floor the week of June 17.

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].

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Budget and Appropriations LEGISLATIVE ACTIVITY

House Appropriations Action. On Friday, May 31, House Majority Leader Eric Cantor (R-VA) released the House legislative agenda for June which includes consideration of four FY 2014 appropriations bills: Military Construction-Veterans Affairs (MilCon-VA); Homeland Security; Defense; and Agriculture. The MilCon-VA (H.R. 2216) and Homeland Security (H.R. 2217) bills are both on the House schedule this week, while the Agriculture and Defense Appropriations Subcommittees will mark up their bills on Wednesday, June 5.

Anticipated Senate Appropriations Action. Senate Appropriations Chairwoman Barbara Mikulski (D-MD) intends to release her committee’s 302(b) allocations in the coming weeks and anticipates a markup of the Military Construction-Veterans Affairs bill in mid-June. In the meantime, the appropriations subcommittees will continue FY 2014 budget request hearings this week.

Sequestration Amendments. Following the recent emergency legislation that enabled the Federal Aviation Administration (FAA) to transfer funding within its programs in order to avert furloughs and prevent the closure of 149 contract towers, lawmakers have been calling for Congress to provide other agencies similar flexibility. Particularly in the Senate, a number of measures have been proposed that would give federal agencies varying degrees of flexibility to allocate funds across budget accounts. None of these proposals have secured sufficient bipartisan support to move forward as a stand-alone bill, in part because the White House and Democrats continue to push for a full sequestration replacement package. However, we anticipate that floor amendments will be offered during House and Senate consideration of FY 2014 appropriations bills.

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 ACTIVITY

House Homeland Security Committee Legislation. The House Homeland Security Committee is drafting legislation that will codify the cybersecurity roles and responsibilities of the Department of Homeland Security (DHS) as well as address other key aspects of cyber. This is the last of the cyber bills the House is expected to move through the chamber to complete its list of cybersecurity priorities. The committee is currently working with stakeholders to finalize its draft bill and is expected

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to introduce the bill in the coming weeks. At the same time, the Senate continues to have discussions with stakeholders and is expected to begin its legislative efforts in earnest in the next few weeks as well.

Supply Chain Working Group. The House Energy & Commerce Subcommittee on Communications and Technology recently launched a bipartisan working group focused on securing the components that make up the communications supply chain. The group will be co-chaired by House Intelligence Committee Chairman Mike Rogers (R-MI) and Subcommittee Ranking Member Anna Eshoo (D-CA). The working group will be holding stakeholder outreach meetings to gain an understanding of what steps can be taken to protect the U.S. telecommunications infrastructure from cyber threats.

EXECUTIVE BRANCH ACTIVITY

U.S. and China Discussions on Cybersecurity. President Barack Obama is scheduled to meet with China’s President Xi Jinping this week in California to discuss cybersecurity, among other issues. Last week, a Department of Defense (DOD) Science Board report was leaked to the media that detailed how Chinese hackers had compromised the blueprints for a large number of critical weapons systems. While the Pentagon has defended the capabilities of its weapons systems and has taken steps to protect its resources from cyber criminals, cybersecurity is still a major concern of the Obama Administration and is likely to be discussed as part of the meetings with President Xi.

NIST Cybersecurity Framework. Last week, the National Institute of Standards and Technology (NIST) held its second workshop to discuss the “Cybersecurity Framework” that it was tasked with developing as part of the President’s February Executive Order (EO). NIST will be holding two more workshops during the weeks of July 15 and September 9 to gather feedback from stakeholders on the standards for critical infrastructure that will be included in the framework. According to the EO, a draft version of the framework is due in October and a final version should be released by February 2014.

Contact Information

For additional insights about likely policy developments, please feel free to contact the authors of this section: Norma Krayem, 202-457-5206 or [email protected]; or Amy Davenport, at 202-457-6528 or [email protected].

Defense

EXECUTIVE AND LEGISLATIVE BRANCH ACTIVITY

Pentagon Budget. This Wednesday, June 5, the House Armed Services Committee will mark up its version of the National Defense Authorization Act (H.R. 1960). That same day, the House Defense Appropriations Subcommittee will also mark up, in a closed session, a spending bill for the Department of Defense (DOD). It is expected the House will largely ignore the spending limits enacted by the Budget Control Act of 2011, which requires across the board spending cuts.

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While top military officials have been stressing the escalating damage from sequestration to readiness, such as fighter jets grounded for lack of training and maintenance and ships at anchor, lawmakers appear willing to wait and watch on whether to rescind the sequester. Currently, Republicans take the position they will only trade mandatory cuts to additional discretionary cuts and continue to stand firm against raising taxes. Democrats maintain any deal with the Republicans has to be 50 percent cuts and 50 percent revenue.

Cybersecurity. Last week the media widely reported on a DOD Science Board report that highlighted China’s purported access to data from Pentagon weapons programs and other defense technologies. The Chairman of the Joint Chiefs of Staff is poised to approve new rules empowering the U.S. military to counter direct cyber attacks. The new cyber rules are expected to be in the Standing Rules of Engagement (SROE) and will allow the U.S. military to respond quickly and defensively to cyber attacks, without having to get approval from the National Security Council.

New Proposal on Contractor Executive Compensation Cap. According to a statement last Thursday, May 30 by Joe Jordan, Administrator of the Office of Federal Procurement Policy (OFPP), the statutory formula governing the amount of executive compensation government contractors can claim as reimbursable costs would be repealed under legislation the administration will propose this week. In lieu of the statutory formula, the proposal would tie the reimbursement cap to the president's annual salary, currently $400,000. The new cap would apply to all civilian and defense cost-reimbursement contracts. In accordance with the statutory formula, the compensation cap was increased to $763,000 for FY 2011 and is set to be increased to more than $950,000 for FY 2012.

This Week’s Hearings:

o Tuesday, June 4: The Senate Armed Services Committee will hold an oversight hearing titled “Pending Legislation Regarding Sexual Assaults in the Military.”

o Wednesday, June 5: The House Armed Services Committee will hold the full Committee markup of its National Defense Authorization Act (H.R. 1960). It is open to the public and streamed live online.

o Wednesday, June 5: The House Appropriations Subcommittee on Defense will mark up a spending measure for DOD. This hearing is closed to the public.

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].

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Education LEGISLATIVE ACTIVITY

Student Loan Interest Rates. As the Senate continues consideration of the Farm Bill, there may be discussion on an amendment (S.A. 976) that would extend the 3.4 percent fixed student loan interest rate for two years, although consideration of this issue will likely take place separate from the Farm Bill. This week, the Senate will likely vote on two student loan interest rate proposals. The first bill (identical to the Farm Bill amendment) would freeze the 3.4 percent student loan interest rate for two years in order to force Congress to address the issue during the reauthorization of the Higher Education Act. The second bill is the House-passed student loan interest rate bill that would create a market-based variable interest rate and peg it to the 10-year Treasury note. To pass, each bill will likely require a 60-vote threshold. However, given the stark differences in addressing this issue, both bills will likely fail, which would place pressure on the Senators to work on a bipartisan solution before the July 1 deadline.

This Week’s Hearing:

o Tuesday, June 4: The House Science, Space and Technology Committee will hold a hearing titled "STEM (Science, Technology, Engineering and Math) Education: The Administration's Proposed Re-Organization." Department officials, including John Holdren, the director of the Office of Science and Technology Policy, will testify about the Administration’s proposed reorganization and consolidation of STEM education programs in the FY 2014 Budget.

Contact Information

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

This Week’s Hearings:

o Tuesday, June 4: The Senate Energy and Natural Resources Committee will explore ways to improve federal wildland fire management.

o Thursday, June 6: The Senate Energy and Natural Resources Committee will review the programs and activities of the U.S. Department of the Interior (DOI).

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o Thursday, June 6: The House Natural Resources Committee will hold a legislative hearing on the Offshore Energy and Jobs Act (H.R. __), draft legislation released by Chairman Doc Hastings (R-WA).

EXECUTIVE BRANCH ACTIVITY

FERC. Federal Energy Regulatory Commission (FERC) Chairman Jon Wellinghoff has submitted his resignation letter to President Barack Obama. He will remain at FERC until his replacement is confirmed by the Senate.

Hydraulic Fracturing (HF). DOI has issued its revised proposed rule to regulate HF activities on federal and tribal lands. Comments will be accepted through June 24, unless pressure from Congress and other stakeholders leads to an extension, potentially of an additional 90 days. A final rule is expected after DOI considers this latest round of public comments; a target date for finalization is not yet certain.

Nuclear. The Nuclear Regulatory Commission’s (NRC) Advisory Committee on Reactor Safeguards will meet on Wednesday, June 5 to Friday, June 7 in Rockville, Maryland. NRC will also be issuing the final License Renewal Interim Staff Guidance this week for Updated Aging Management Criteria for Reactor Vessel Internal Components for Pressurized Water Reactors.

NPR-A. The Bureau of Land Management will issue a call for nominations and comments, due by mid-July, on tracts for oil and gas leasing for the 2013 National Petroleum Reserve – Alaska lease sale.

USEITI. The U.S. Extractive Industries Transparency Initiative (EITI) Multi-Stakeholder Group Advisory Committee will next meet on June 12-13 to discuss the legal context for revenue disclosures, consideration of sub-national payments, and discussions on scope and materiality; it will also meet on July 23-24 to discuss criteria and components for the U.S. draft candidacy application for EITI.

Pipelines. The FERC is updating regulations governing the form, composition, and filing of rates and charges by interstate oil pipelines for transportation in interstate commerce. The Pipeline and Hazardous Materials Safety Administration (PHMSA) will host a pipeline safety workshop on June 19-20 in Richardson, Texas to discuss ways to improve public awareness outreach. PHMSA will also host an August 7 public workshop on a proposed pipeline “Integrity Verification Process,” to present information on several new mandates and to seek comment from interested stakeholders.

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].

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Environment LEGISLATIVE ACTIVITY

This Week’s Hearings:

o Tuesday, June 4: The Senate Committee on Energy and Natural Resources will hold a full committee hearing intended to identify ways to improve federal wildland fire management.

o Tuesday, June 4: The House Committee on Natural Resources will hold a full committee hearing to address species conservation concerning tribal, state and local stewardship in conjunction with federal “sue-and-settle” practices.

o Wednesday, June 5: The House Committee on Oversight and Government Reform, Subcommittee on Energy Policy, Health Care and Entitlements, will hold a hearing to examine the role of the U.S. Environmental Protection Agency (EPA) in the renewable fuel standard. The specific focus will be on fuel blends.

o Wednesday, June 5: The House Committee on Science, Space and Technology will hold a joint subcommittee hearing by the Subcommittee on Research and Subcommittee on Technology concerning federal efforts to reduce the impacts of windstorms. Witnesses will include Dr. Ernst Kiesling, Research Faculty, National Wind Institute, Texas Tech University; Ms. Debra Ballen, General Counsel and Senior Vice President, Public Policy, Insurance Institute for Business & Home Safety; Dr. David Prevatt, Assistant Professor, Department of Civil and Coastal Engineering, University of Florida.

o Thursday, June 6: The Senate Committee on Energy and Natural Resources will hold a full committee hearing to review programs and activities of the U.S. Department of the Interior (DOI).

REGULATORY ACTIVITY

Gulf Coast Restoration. The U.S Department of Commerce, the lead agency for the Gulf Coast Ecosystem Restoration Council, has issued its “Draft Initial Comprehensive Plan: Restoring the Gulf Coast’s Ecosystem and Economy” and accompanying “Draft Programmatic Environmental Assessment” for public comment. The Draft Plan provides a framework to implement a region-wide restoration effort in order to restore the Gulf Coast region following the Deepwater Horizon oil spill. The Council is also hosting a series of public engagement sessions in each of the five impacted Gulf States from Monday, June 3 to June 17 for public input on the Draft Plan. The Draft Initial Plan and the Draft Programmatic Environmental Assessment documents, as well as details concerning the June public engagement sessions can be accessed here. Comments are due June 24.

Public Water Systems. The following information pertains to states, local and tribal governments, private and municipal owners or operators of public water systems. EPA has released a final rule

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approving alternative testing methods for use in measuring the levels of contaminants in drinking water and compliance with national primary drinking water regulations. EPA is making 84 additional methods available for analyzing drinking water samples. The EPA intends for this to be an expedited approach in order to provide public water systems, laboratories and primacy agencies with more timely access to new measurement techniques and greater flexibility in the selection of analytical methods. The new methods, along with previously expedited methods in 40 CFR Part 141 Appendix A to Subpart C and on EPA’s drinking water methods, are listed here.

Motor Vehicles. The EPA is extending the public comment period to July 1, which previously was to end on June 13, for its proposed rule concerning “Control of Air Pollution From Motor Vehicles: Tier 3 Motor Vehicle Emission and Fuel Standards.”

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

This Week’s Hearings:

o Tuesday, June 4: The Senate Banking Committee will hold a hearing titled “Iran Sanctions: Ensuring Robust Enforcement, and Assessing Next Steps.”

o Wednesday, June 5: The Senate Banking Subcommittee on Housing, Transportation, and Community Development will hold a hearing titled “Long Term Sustainability for Reverse Mortgages: HECM’s Impact on the Mutual Mortgage Insurance Fund.”

o Wednesday, June 5: The Senate Banking Subcommittee on Economic Development will hold a hearing titled “State of the American Dream: Economic Policy and the Future of the Middle Class.”

o Wednesday, June 5: The House Financial Services Subcommittee on Capital Markets and Government Sponsored Enterprises will hold a hearing titled “Examining the Market Power and Impact of Proxy Advisory Firms.”

o Thursday, June 6: The House Small Business Subcommittee on Investigations, Oversight, and Regulations will hold a hearing titled “Financing America's Small Businesses: Innovative Ideas for Raising Capital.”

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EXECUTIVE BRANCH ACTIVITY

President Announces Two SEC Nominations. President Obama has nominated Kara Stein and Michael Piwowar to serve as Commissioners of the Securities and Exchange Commission (SEC). Both of the President’s nominees are veteran Hill staffers that are very well liked and respected. Kara Stein, currently legal counsel and senior policy adviser to Sen. Jack Reed (D-RI), would fill Commissioner Elisse Walter’s seat, set to be vacated by the end of this year. Michael Piwowar, chief economist for the Senate Banking Committee since 2009, would replace Commission Troy Paredes, whose term ends in June.

This Week’s Meetings:

o Tuesday, June 4: The Federal Deposit Insurance Corporation (FDIC) will meet in open session to consider a final rule on the Definition of “Predominantly Engaged in Activities that are Financial in Nature or Incidental Thereto” § 201(b).

o Wednesday, June 5: The SEC will hold an open meeting to consider a recommendation to propose amendments to certain rules under the Investment Company Act that govern the operation of money market funds and related amendments to Form PF under the Investment Advisers Act.

Contact Information

For additional insights about likely policy developments, please feel free to contact the authors of this section: Caroline Cauley, at 202-457-6625 or [email protected]; Mara Giorgio, at 202-457-6522 or [email protected]; and Matt Kulkin, at 202-457-6056 or [email protected].

Health Care LEGISLATIVE ACTIVITY

E&C SGR Reform Draft and Hearing. House Energy & Commerce Committee staff unveiled a draft legislative framework for repeal of the Sustainable Growth Rate (SGR) formula. The proposed framework would repeal and replace the SGR and provide an undefined period of stable payments. It would also include the development of quality measures for competency assessments – the Secretary would develop cohorts of providers and develop sets of measures or “competencies” within each cohort. The measures would be published before being proposed in notice and comment rulemaking. The framework also includes an opt-out option for providers to be paid under alternative payment models. Under this option, the Secretary would publish a list of approved models in which providers could participate and would develop a process by which stakeholders could propose new payment models for consideration. The framework leaves blank any discussion of funding specifics. The proposal leaves open many issues; interested parties may submit feedback on the proposed

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framework by June 10 to [email protected]. The committee will hold a hearing on the proposal on Wednesday, June 5 (see This Week’s Hearings below). Chairman Upton intends to pass a bill out of Committee, and possibly through the full House, by the end of the summer.

This Week’s Hearings:

o Tuesday, June 4: The House Committee on Education and the Workforce will hold a hearing titled "Reviewing the President's FY 2014 Budget Proposal for the U.S. Department of Health and Human Services." The Honorable Kathleen Sebelius, Secretary of HHS, will testify.

o Wednesday, June 5: The House Energy & Commerce Committee will hold a hearing on Medicare physician payment overhaul legislation.

REGULATORY ACTIVITY

Wellness Programs Final Rule. The Internal Revenue Service (IRS), U.S. Department of Labor (DOL), and U.S. Department of Health and Human Services (HHS) released the Incentives for Nondiscriminatory Wellness Programs in Group Health Plans Final Rule. This document contains final regulations, consistent with the Affordable Care Act (ACA), regarding nondiscriminatory wellness programs in group health coverage. Specifically, these final regulations increase the maximum permissible reward under a health-contingent wellness program offered in connection with a group health plan (and any related health insurance coverage) from 20 percent to 30 percent of the cost of coverage. The final regulations further increase the maximum permissible reward to 50 percent for wellness programs designed to prevent or reduce tobacco use. These regulations also include other clarifications regarding the reasonable design of health-contingent wellness programs and the reasonable alternatives they must offer in order to avoid prohibited discrimination.

OTHER HEALTH NEWS

Medicare Trustees Report. The Medicare Trustees released a report on Friday, May 31 that predicted that the Medicare trust fund will be solvent until 2026, which is two years beyond what the trustees projected last year. The report found lower-than-expected growth of Medicare spending in 2012, lower projected spending in many categories, and reflected an expectation that the federal health care law will reduce growth in Medicare Advantage spending more than previously anticipated.

MedPAC Appointments. The Government Accountability Office (GAO) made its appointments to the Medicare Payment Advisory Commission (MedPAC). Jon Christianson, PhD, was appointed as a new member, along with reappointments of Scott Armstrong, Katherine Baicker, PhD, Herb Kuhn, Mary Naylor, PhD, RN, and Cori Uccello, FSA.

Medicaid State Readiness Report. The Urban Institute and Robert Wood Johnson Foundation released a report on state readiness for Medicaid expansion. The brief examines how eight states are altering their Medicaid managed care programs as they move into the home stretch of implementing the ACA. In particular, the report draws on the experiences of eight states (Maryland, Michigan, Minnesota, New Mexico, New York, Oregon, Rhode Island, and Virginia) participating in the Robert Wood Johnson Foundation’s State Health Reform Assistance Network and the related health reform

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implementation monitoring and tracking project. The report describes how these states are revamping their Medicaid managed care programs and how they are preparing the programs to provide coverage to new enrollees under health reform, and look into health plan and health care stakeholders’ perceptions of the changes and preparations. The report concludes that states with Medicaid managed care programs seem well-positioned to handle the ACA Medicaid expansion.

OIG Health Reports. The Office of Inspector General (OIG) released two reports last Tuesday, May 28. In the first report, “Improvements are Needed To Ensure Provider Enumeration and Medicare Enrollment Data Are Accurate, Complete, and Consistent,” OIG states that inaccurate, incomplete, and inconsistent provider data coupled with insufficient oversight place the integrity of the Medicare program at risk and present vulnerabilities in all health care programs. OIG recommends that the Centers for Medicare & Medicaid Services (CMS) should require Medicare Administrative Contractors to implement program integrity safeguards for Medicare provider enrollment as established in the Program Integrity Manual. Additionally, CMS should require more verification of National Plan & Provider Enumeration System (NPPES) enumeration and Provider Enrollment, Chain, and Ownership System (PECOS) enrollment data. Finally, CMS should detect and correct inaccurate and incomplete provider enumeration and enrollment data for new and established records. In the second report, “Medicare Could Save Millions by Implementing a Hospital Transfer Payment Policy for Early Discharges to Hospice Care,” OIG estimated that Medicare could have saved $602.5 million for calendar years 2009 and 2010 by applying a hospital transfer payment policy for early discharges to hospice care.

CSHSC Report on Geographic Variations in Medical Spending. The Center for Studying Health System Change released a report on geographic variations in medical spending. The report suggests that at least 75 to 85 percent of the difference between high-cost and low-cost areas can be explained by taking patient health into consideration.

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].

Homeland Security LEGISLATIVE ACTIVITY

Budget and Appropriations. On May 22, the House Appropriations Committee approved the FY 2014 Homeland Security appropriations bill, which provides $38.9 billion in discretionary funding to the U.S. Department of Homeland Security (DHS) overall: $35 million below the president’s request, $618 million below the fiscal 2013 enacted amount and $981 million above the current post-

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sequestration level. The bill provides $817 million less in infrastructure protection that the president requested to penalize DHS for failing to implement chemical security programs in the wake of the Texas fertilizer plant explosion. The Senate Appropriations Committee has not yet moved forward on the FY 2014 DHS bill.

Comprehensive Immigration Reform. On May 21, the Senate Judiciary Committee approved by a vote of 13-5 the Border Security, Economic Opportunity, and Immigration Modernization Act (S. 744), which included a number of amendments to address some of the Republicans’ concerns about adequate border security. Senate Majority Leader Harry Reid (D-NV) expects to begin floor debate the week of Monday, June 10 and plans to hold a vote on the bill by the end of June. Efforts continue to secure the 60 votes needed to move ahead with the bill. The bipartisan Gang of Eight in the House has reached an agreement in principle on a comprehensive bill, but there are still hurdles to reaching a final deal. In the meantime, House Judiciary Committee Chairman Robert Goodlatte (R-VA) is planning to hold hearings on portions of the immigration bill in his committee.

This Week’s Hearings:

o Tuesday, June 4: The Senate Judiciary Subcommittee on Crime, Terrorism, Homeland Security, and Investigations will hold an oversight hearing titled “The Department of Justice’s Handling of Known or Suspected Terrorists Admitted into the Federal Witness Security Program.”

o Tuesday, June 4: The House Homeland Security Subcommittee on Emergency Preparedness, Response, and Communications will hold a hearing titled “Emergency MGMT 2.0: How #SocialMedia & New Tech are Transforming Preparedness, Response, & Recovery #Disasters #Part 1 #PrivateSector.”

o To Be Determined: The House Appropriations Subcommittee on Homeland Security has announced that it will reschedule the March 6 hearing on the U.S. Customs and Border Protection Budget and Management, but it has not yet finalized a date. U.S. Customs and Border Protection Deputy Commissioner David Aguilar will testify.

EXECUTIVE BRANCH ACTIVITY

TSA Airport Scanners. Transportation Security Administrator John Pistole has informed House Homeland Security Committee Chairman Michael McCaul (R-TX) and Ranking Member Bennie Thompson (D-MS) that the agency will meet its extended deadline of June 2013 to phase out “backscatter imaging” airport body scanners that many lawmakers believe invade travelers’ privacy and could cause health problems. The agency has already begun installing privacy software that enables machines to produce only a generic body outline.

Contact Information

For additional insights about likely policy developments, please feel free to contact the authors of this section: Alexis Early, at 202-457-5105 or [email protected]; and Norma Krayem, at 202-457-5206 or [email protected].

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Immigration LEGISLATIVE ACTIVITY

Senate. The Senate Judiciary Committee voted the Border Security, Economic Opportunity, and Immigration Modernization Act (S. 744) out of committee on May 22 by a vote of 13-5. Senate Majority Leader Harry Reid (D-NV) expects to open Senate floor debate the week of Monday, June 10, and plans to hold a vote three weeks later before the July 4 congressional recess. Senators are expected to offer a number of amendments, and the bipartisan Gang of Eight is working to address concerns and block amendments that either party would consider a “poison pill.” The upper chamber continues to disagree over border security measures, the path to legalization, and high-skilled visa reform versus protections for U.S. workers. Sen. Orrin Hatch (R-UT) – a member of the Senate Judiciary Committee and Ranking Member of the Senate Finance Committee – continues to express concerns that certain taxation provisions fall under Finance Committee jurisdiction, and he may not support final passage until that issue is addressed.

House of Representatives. The Gang of Eight members of the House of Representatives continue to report that they have reached a deal “in principle” for a bipartisan bill, but doubts remain because a bill has not yet been introduced. They have not yet resolved whether undocumented immigrants seeking legalization will be required to purchase health insurance on the open market while they await permanent status. Current law does not allow them to purchase it under the benefits or exchanges of the Affordable Care Act (ACA), but it does not require them to purchase insurance privately. Republicans are seeking to add that requirement to the immigration bill to ensure that immigrants prove they will not become a public charge once legalized. Energy & Commerce Committee Ranking Member Henry Waxman (D-CA) is opposing this effort to require the undocumented to buy insurance at what Democrats fear will be unaffordable market rates. Democrats argue this provision would violate deals they made to pass the ACA and would create an impossible hurdle to legalization for many undocumented immigrants.

However, House Judiciary Committee Chairman Robert Goodlatte (R-VA) has followed through on his plans to take up piecemeal bills that address discrete aspects of the immigration system. His committee already held hearings on the Agricultural Guestworker Act (H.R. 1773) to reform the temporary agricultural worker program and the Legal Workforce Act (H.R. 1772) to implement the E-Verify system and discourage hiring of undocumented immigrants. The committee will likely hold a hearing on the Supporting Knowledge-based Immigrants & Lifting Levels of STEM Visas Act (SKILLS Act, H.R. 2131), co-sponsored by Chairman Goodlatte and committee member Rep. Darrell Issa (R-CA). Speaker John Boehner (R-OH) has indicated that all immigration bills will proceed through the Judiciary Committee, and he has also warned that the House will not simply take up a bill passed in the Senate.

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Contact Information

For additional insights about likely policy developments, please feel free to contact the authors of this section: Alexis Early, at 202-457-5105 or [email protected]; and Kristin Wells, at 202-457-6422 or [email protected].

International EXECUTIVE AND LEGISLATIVE BRANCH ACTIVITY

Syria. During last week’s Congressional recess, Senator John McCain (R-AZ) slipped over the Turkish border into Syria to meet with the leaders of the Free Syrian Army. Syrian opposition leaders reportedly called on the United States to increase its support by providing heavy weapons, instituting a no-fly zone and employing airstrikes against the Syrian regime and Hezbollah forces that are increasingly active in Syria. Free Syrian Army Gen. Salem Idris said in an exclusive interview with THE DAILY BEAST, “We need American help to have change on the ground; we are now in a very critical situation.”

Also last week, tension ratcheted up over possible Russian arms sales to the Assad regime and the European Union’s (EU) recent decision to lift its embargo on arming the rebels in advance of the early June international peace conference in Geneva. The Syrian opposition still has yet to confirm its attendance.

Iran. Last week, the U.S. Government eased its restrictions on the sale of mobile phones and other communication devices and software to Iranian citizens. The U.S. Department of the Treasury justified the action, saying “The people of Iran should be able to communicate and access information without being subject to reprisals by the government.” The Government of Iran and those individuals listed on the Treasury Department’s “specially designated nationals” remain barred from export licenses. This move comes just weeks ahead of the June 14 elections in Iran. This Tuesday, June 4, the Senate Banking, Housing, and Urban Affairs Committee will hold a hearing on this issue (See This Week’s Hearings below.)

U.S.-China Heads of State Summit. Later this week, Chinese President Xi Jinping will meet with President Obama in California. The agenda is expected to include North Korea, Iran, Syria, the South China Sea, economic relations and cyber security. Last week, the media widely reported on a U.S. Department of Defense Science Board report that highlighted China’s purported access of data on Pentagon weapons programs and other defense technologies.

Counterterrorism. On May 23, just before the Congressional recess, President Barack Obama gave a national security policy speech at the National Defense University. The President noted that while the core of al-Qaeda in Afghanistan and Pakistan is “on the path to defeat”, there has been an emergence of various al Qaeda affiliates. President Obama further defended as effective his Administration’s use of “lethal, targeted action against al Qaeda and its associated forces, including

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with remotely piloted aircraft commonly referred to as drones.” He said, “Where foreign governments cannot or will not effectively stop terrorism in their territory, the primary alternative to targeted lethal action would be the use of conventional military options.”

The President affirmed U.S. targeted strikes are legal but cautioned “America’s legitimate claim of self-defense cannot be the end of the discussion.” President Obama also shared that his Administration has devised a framework that governs U.S. use of force against terrorists, noting the framework was formally codified in a Presidential Policy Guidance he signed the day before the speech.

Terrorism Reports. Last Thursday, May 30, the State Department released its annual 2012 Country Reports on Terrorism. The Report notes a resurgence of Iran’s state sponsorship of terrorism and increased Hezbollah terrorist activity, which includes both reportedly engaged in a “broad range of support to the Assad [Syria] regime.” While the Report also reflects al-Qaeda leadership losses, it notes terrorist threats are increasingly decentralized and geographically dispersed.

Trade. Last week, the Office of the United States Trade Representative (USTR) and the Interagency Trade Policy Staff Committee chaired a public hearing on U.S. negotiating objectives for the proposed Transatlantic Trade and Investment Partnership (TTIP) agreement. USTR and other agencies are engaged in a 90-day consultation process regarding the proposed TTIP agreement. This Thursday, June 6, the Senate Finance Committee will hold its confirmation hearing for Michael Froman to be the U.S. Trade Representative.

Also last week, the World Organization for Animal Health upgraded the United States’ risk status for bovine spongiform encephalopathy (BSE) to “negligible.” Montana Senator and Senate Finance Committee Chairman Max Baucus (D-MT) lauded the news, saying “having the top safety rating will help us to tear down the remaining barriers to American beef exports and ensure that our trading partners abide by science-based standards.”

Western Hemisphere. Vice President Biden wrapped his trip last week to the Western Hemisphere with a final stop in Brazil. He reaffirmed U.S. engagement with its neighbors in the Western hemisphere. The White House also announced President Obama will host Brazilian President Dilma Rousseff for an official State Visit and State Dinner on October 23.

Middle East Peace. Despite Secretary Kerry’s recent visit to Israel to discuss the Middle East Peace process, Israel announced additional settlement construction plans after his departure from the region. The U.S. Government maintains continued construction by Israel in East Jerusalem is counterproductive to the peace talks.

Nominations and Departures. President Obama has announced his intention to nominate the following individuals: James Entwistle to be U.S. Ambassador to Nigeria; Douglas Lute to be the U.S. Permanent Representative on the Council of the North Atlantic Treaty Organization; Victoria Nuland to be Assistant Secretary of State for European and Eurasian Affairs; and Kara Stein to be Commissioner of the Securities and Exchange Commission. This week, the Senate Foreign Relations Committee will hold confirmation hearings (See This Week’s Hearings below for specifics.)

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Last week, Chairman of the President’s Council of Economic Advisers Alan Krueger announced he will return to the private sector. The President has yet to announce his replacement.

This Week’s Hearings:

o Monday, June 3: The House Foreign Affairs Subcommittee on Global Human Rights will hold a hearing on the anniversary of the 1989 Tiananmen Square tragedy. The Administration is not scheduled to testify.

o Tuesday, June 4: The Senate Banking, Housing, and Urban Affairs Committee will hold a hearing titled “Iran Sanctions – Ensuring Enforcement and Assessing Next Steps.” Scheduled to testify from the Administration are: Under Secretary of the Treasury for Terrorism and Financial Intelligence David Cohen, Under Secretary of State for Political Affairs Wendy Sherman, and Under Secretary of Commerce for Industry and Security Eric Hirschhorn.

o Tuesday, June 4: The House Foreign Affairs Subcommittee on Global Human Rights will hold a hearing titled “Continuing Repression by the Vietnamese Government.” The Administration is not scheduled to testify.

o Wednesday, June 5: The Senate Foreign Relations Committee will hold a confirmation hearing for Dr. Tulinabo Salama Mushingi to be U.S. Ambassador to Burkina Faso and Catherine Russell to be Ambassador-at-Large for Global Women’s Issues.

o Wednesday, June 5: The House Foreign Affairs Subcommittee on the Middle East and North Africa will hold a hearing titled “A Crisis Mismanaged: Obama’s Failed Syria Policy.” The Administration is not scheduled to testify.

o Wednesday, June 5: The House Foreign Affairs Subcommittee on Asia and the Pacific will hold a hearing titled “U.S. Relations with Vietnam.” Acting Assistant Secretary of State for East Asian and Pacific Affairs Joseph Yun and Deputy Assistant Secretary of State for Democracy, Human Rights and Labor Daniel Baer are scheduled to testify.

o Thursday, June 6: The Senate Foreign Relations Committee will hold a hearing titled “Labor Issues in Bangladesh”. Assistant Secretary of State for South and Central Asian Affairs Robert Blake is scheduled to testify.

o Thursday, June 6: The Senate Foreign Relations Committee will hold a confirmation hearing for Geoffrey Pyatte to be U.S. Ambassador to Ukraine.

o Thursday, June 6: The Senate Finance Committee will hold a confirmation hearing for Michael Froman to be the U.S. Trade Representative.

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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

Tax Writing Committee Meetings Continue. The Senate Finance Committee has continued its series of closed-door committee meetings on tax reform, recently issuing their latest Option Paper on May 23 – this one on Economic Security. The closed-door meetings 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 this latest paper, when reviewing the tax rules that affect the economic security of Americans, the committee stated that the aim is to: simplify the taxation of retirement savings and health insurance, minimize the disruption to business practices and employee expectations inherent in any fundamental tax reform, increase the number of people with enough resources for an adequate standard of living in retirement, and expand access to health insurance. For a full recap of the issues presented, the committee released an option paper available here.

The Economic Security Option Paper was the seventh topic covered by the committee. The committee is expected to release ten Option Papers. The final three are likely to come in the next few weeks. A list of all the Option Papers currently published is available here.

CBO Report Says Tax Expenditures Benefiting Wealthiest Americans. Last week the Congressional Budget Office (CBO) released a report that the wealthiest Americans benefit most from ten of the largest tax expenditures. The CBO estimated that more than 50 percent of the largest tax expenditures benefit the top fifth of U.S. households based on income. House Budget Committee ranking member Chris Van Hollen (D-MD) and House Ways and Means ranking member Sandy Levin (D-MI) argued the report confirms that additional revenue to pay down the federal debt and offset sequestration spending cuts can be obtained by eliminating or limiting tax preferences that benefit the wealthy.

This Week’s Hearings:

o Tuesday, June 4: The House Ways and Means Committee will hold a hearing with organizations targeted by the Internal Revenue Service for their personal beliefs.

o Wednesday, June 5: The House Ways and Means Committee will hold a hearing on how Social Security protects the benefits of those who cannot protect themselves.

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o Thursday, June 6: The Senate Finance Committee will hold a Hearing to consider the Nomination of Michael Froman to be the U.S. Trade Representative.

Contact Information

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