United States: Legislative Summary of the 109th Congress
Review of the First Session and Expectations for the Second

Article by David Leiter

ML Strategies, a consulting firm specializing in government relations, public relations and real estate advisory services, is pleased to present this summary of the 2005 Congressional session and a look ahead to issues of importance in 2006. With a bipartisan team in our Washington D.C. office, ML Strategies is well-positioned to analyze Congressional actions and their impact on our clients as well as identify key pieces of legislation and trends in the current session.

In Jan. 2005, GOP leaders, buoyed by strong election results in 2004, began the first session of the 109^th Congress with an ambitious legislative agenda. The first ten Republican bills introduced in the Senate concerned issues such as Social Security reform, tax-cuts, class-action lawsuit reform, and a comprehensive energy policy. While Republicans managed to pass much of their proposed legislation, including a federal energy policy that emphasized enhanced production, a Central American free-trade agreement, and limits to class action litigation, the process required more time and compromise than most expected at the beginning of the year. In addition, Congress failed to pass two of the President’s top aims, Social Security privatization and a permanent renewal of the Patriot Act.

The mounting costs of the Iraq war, the perceived slow response of the administration to Hurricane Katrina, and the indictment of House Majority Leader Tom DeLay (R-TX) allowed emboldened Democrats and moderate Republicans to successfully thwart the majority’s agenda at crucial points. Several victories by the Democrats at the end of the first session--including the threat of a filibuster to remove a drilling provision for the Arctic National Wildlife Refuge in the Defense appropriations bill--complicated the end of the session and had lawmakers working up until the holiday recess.

The House is scheduled to return Jan. 31, one of the latest adjournments in recent memory. The Senate will return Jan. 18. The Supreme Court nomination hearings for Judge Samuel Alito will consume the Senate’s attention in January. Afterwards, Congress will likely pick up many of the issues held over from the first session: an overhaul of the system guaranteeing federal pensions, the permanent expansion of the Patriot Act, a rewrite of current telecommunications law, and the reauthorization of the Higher Education Act. In addition, GOP leadership may consider tax cuts and tax code reform as well as opening the Arctic National Wildlife Refuge to oil exploration. However, with 2006 being an election year, members will want to adjourn by October and the window for legislative action promises to be compressed.

The Senate and House Committees with primary jurisdiction over communications issues expect to be busy in 2006. Reform of the Telecommunications Act of 1996 has been a key priority for both Sen. Ted Stevens (R-AK) and Rep. Joe Barton (R-TX), the chairs of those two committees. They are also considering legislation involving the national broadcasting transition to Digital TV frequencies, E-911 requirements for VoIP providers, restrictions on spyware, and indecency on broadcast TV and radio.

House Energy and Commerce Committee Chairman Barton is eager to enact legislation that would update the Telecommunications Act of 1996 and set new rules for Internet-based video and voice services. Committee staff is currently working on a third draft of his telecom reform bill. Barton’s first draft was opposed by some in the industry, but the second draft, which floated without consulting with Democrats, was criticized by independent Internet providers and consumer groups for not protecting "network neutrality." Barton originally had hoped the Telecom Subcommittee would mark up his bill by mid-December, but both sides said they needed more negotiating time.

Negotiations this year are expected to focus on franchising rules for broadband video services provided by the phone companies. Lawmakers are deciding whether or not broadband services should be subject to federal franchise standards rather than the current local franchise agreement model for cable companies. Legislators also disagree on the definition of "broadband video service" and are debating whether or not cable television operators should be able to opt for these national franchises. In addition, some legislators want to ensure that these franchising arrangements to not undermine municipalities that require video operators to provide channels for public and educational use. Despite general support for a "network neutrality" provision, the devil is in the details, and members are still debating what exceptions should apply to ensure that telco, cable, and other broadband providers can keep their networks secure, prevent users from hogging bandwidth, and offer services such as spam filters. Lastly, Democrats want the legislation to prevent the regional Bell companies and other broadband providers from "redlining," the practice of targeting new services only to lucrative urban and suburban markets.

The Senate bill would take a broader approach than the House’s version. Whereas Chairman Barton adopted a two-track approach to telecom reform, with broadband voice and video services in the first bill and other issues like Universal Service Fund (USF) reform in the second, Chairman Stevens prefers one comprehensive bill. Stevens has held a series of "listening sessions" with industry officials and has solicited ideas from fellow senators on the committee, notably Sen. John Ensign (R-NV), who introduced his own telecom reform bill in July 2005. Ensign’s bill would reduce state and local regulation of telecommunications services.

Although Senate staff acknowledges that this year's election cycle will shorten the time available to move legislation, they remain committed to introducing and passing legislation in the second session. However, if time becomes short and some issues remain insurmountable, Sen. Stevens may have to resort to a series of smaller bills instead of one comprehensive bill.

The Senate Commerce Committee’s telecom-packed agenda for the first quarter of 2006 includes 15 hearings on topics ranging from decency bills to oversight of the FCC. Other potential telecom topics set for 2006 Senate hearings include: net neutrality, state involvement with local municipal networks, broadcast and audio flag, competition and convergence, rural telecom, as well as video content and video franchising. A list of Senate Commerce Committee hearings currently scheduled can be found at the following link: http://commerce.senate.gov/hearings/index.cfm

The budget reconciliation package, which the Senate passed Dec. 21, contained a hard transition date of Feb. 17, 2009 for the nation’s switch to digital television. Communications companies and public safety advocates want to use the spectrum currently used by analog TV broadcasters for advanced, interoperable communications systems for emergency services providers. The legislation opens prime spectrum to emergency responders, a major recommendation of the independent commission that investigated the Sept. 11 terrorist attacks. An auction for the remaining analog spectrum is expected to bring in at least $10 billion. Most of these revenues would be used to offset the deficit, but $1.5 billion would be used for a coupon program to help subsidize set-top converter boxes for consumers with analog TV sets, who otherwise would be unable to receive any television signals after the conversion. While a technical change sent the bill back to the House for final approval, the transition date is not expected to change. The full House is tentatively scheduled to vote on the bill on Feb. 1.

Disagreements over how to balance consumer and industry concerns impeded the progress of anti-spyware legislation. The House has passed two bills on the issue, and the Senate has passed one bill out of committee. Rep. Mary Bono’s (R-CA) anti-spyware legislation was approved by the House in May. The bill required software companies to get a computer user’s permission before installing programs that can collect personal data. The bill enjoyed bipartisan support and the endorsement of several large companies. Sen. Conrad Burns (R-MT) introduced similar legislation in the Senate that would ban the installation of software that delivers online ads without identifying their source and would prohibit software that a user cannot uninstall. Burns’ legislation would also outlaw "modem hijacking," and "denial of service" attacks, which cripple Web sites by continuously overloading them with traffic. His bill passed out of the Senate Commerce Committee and is expected to be brought to a full Senate vote early this year.

The FCC last year required Voice Over Internet Protocol (VoIP) providers to make their service fully E-911 compliant by Nov. 28, 2005.  E-911 technology allows emergency operators to receive additional information about a caller such as the caller’s location. VoIP firms had to stop marketing to new customers if they could not offer E-911 to all current customers by that date. VoIP firms sought a legislative solution, and Sen. Nelson (D-FL) introduced a bill that would require the FCC to waive for 12 months any 911 and E-911 requirements when a VoIP provider demonstrated it is not technically or operationally feasible to comply. Some public safety groups like the Association of Public Safety Communications Officials and the Fraternal Order of Police fought to eliminate (or at least ease) the waiver language. The bill was approved by the Senate Commerce Committee in November, but it failed to pass the full Senate before adjournment. This issue is likely to see action in early 2006.

Since the Janet Jackson "episode" in last year’s Superbowl, lawmakers have intensified their efforts to curb alleged indecency on television. Sen. Rockefeller (D-WV) introduced a bill in March that would increase fines for violent programming and double the amount of children’s programming available. Sen. Ron Wyden (D-OR) has sponsored legislation to require cable and satellite operators to offer a child-friendly tier of programming or face fines as large as $500,000 a day. Senate Commerce Chairman Stevens has expressed interest in the idea of a family-friendly tier and is considering various proposals aimed at curbing indecent broadcast television as well. Sen. Stevens had threatened to extend indecency fines to cable, but in a December Senate forum on decency, Stevens said he wants to give the cable and broadcast industries a chance to self-regulate — by improving ratings and parental controls — before turning to government mandates. At the same Senate forum, the FCC reversed its previous position and endorsed a la carte carriage, which would allow consumers to select and pay for individual channels that they want. Some cable providers and many cable programmers argue that "a la carte" would actually increase cable rates and lead to the demise of many lesser-watched, niche cable networks. In December, Comcast and Time Warner announced they would offer family tiers. Stevens has scheduled another hearing on decency for Jan. 19.

The 109^th Congress began by refocusing attention on the issue of medical liability and the possibility of a malpractice overhaul in Congress. The first session was also marked by continued debate regarding the Medicare prescription drug plan created as part of the Medicare bill passed in 2003 and that went into effect as of January 2006. As Congress continues its oversight of the prescription drug program and its implementation, additional regulatory and legislative refinements are likely. Additionally, as data on the actual cost of the drug program becomes available, there will be continued pressure to allow the federal government to negotiate drug prices under Medicare directly, impose price controls and permit the importation of drugs from other countries.

As spending for drugs and medical devices continues to grow--and with spending for biotechnology drugs growing twice as fast as traditional prescription drugs--Congress is likely to confront the issue. Pressure for Congressional action will especially mount if the actual costs of the Medicare prescription drug program exceed current estimates. Sen. Hatch (R-UT) is said to be writing legislation that would create rules for the Food and Drug Administration (FDA) to allow "follow-on" or generic biologic drugs after their original patents expire. Hatch believes that competition could help lower prices for biologic drugs. Despite the failure of several previous attempts, lawmakers will continue to introduce legislation to allow the federal government to negotiate drug prices. Republican leadership opposes the change and claims it would distort the market and impede innovation. Another option some are considering is the creation of an independent federal agency that would assess a drug’s value and perhaps recommend what the proper level of reimbursement might be. Proponents of such an approach argue that this information would aid patients and insurers in negotiating drug prices. In addition, legislators and the FDA, through its "Critical Path Initiative," are looking at ways to streamline the drug review and approval process to make it less costly, shorter, and more effective. Drug companies that manufacture products for exceedingly rare diseases are especially eager to enact this change, because they must recoup their costs through sales to a smaller base of patients.

High drug prices will also reinvigorate the issue of drug importation. The issue dominated the headlines in 2004, but had petered out by the end of 2005. In a recent major development, the American Association of Retired Persons (AARP), which had previously supported drug importation, announced that such an approach may not be necessary because of the Medicare prescription drug program. The loss of support from this organization will hurt importation efforts and weaken the likelihood of any successful passage this year. In fact, concern regarding the safety of imported, counterfeit and adulterated drugs will likely provide an opportunity for stakeholders to secure a uniform federal system of licensing and regulation for both wholesalers and Internet pharmacies.

Unrestricted federal funding of embryonic stem cell research remains a controversial issue: some see opportunities to develop cures for cancer and other diseases, but others equate the destruction of embryos to abortion. In 2001, President Bush issued an executive order that permitted federal funding of embryonic stem cell research, but only on those stem cell lines that already existed. In May, the House passed a bill that would permit the funding of all embryonic stem cell lines, regardless of when they were created.  Prospects for passage of this legislation appeared to gain steam after Senate Majority Leader Frist (R-TN) announced his support for the bill and agreed, in principle, to hold a vote on this issue prior to adjournment. However, citing both a lack of time, failure to reach an agreement on the format of the debate and a Presidential veto-threat, no such vote was held. Instead, both chambers passed relatively non-controversial legislation signed by President Bush in December that would create an umbilical cord blood database for physicians to use in research and in finding bone marrow matches.

The recent spate of high profile drug withdrawals and safety concerns have raised questions about the manner in which the FDA reviews, approves, and monitors drugs and medical devices. The FDA has taken a number of internal steps to increase the safety of these protocols. However, if legislators are not convinced the FDA can improve safety on its own, Congress may act to provide the agency with additional authorities and to limit fast-track and expedited drug reviews. One such proposal, The FDA Safety Act of 2005, introduced by Sen. Grassley (R-IA) and Sen. Dodd (D-CT), would create an independent center within the FDA focusing on post-market drug evaluation and research. Nevertheless, Senate Health, Education, Labor and Pensions Committee Chairman Enzi (R-WY), whose committee has jurisdiction over the FDA, has indicated his belief that the legislation is excessive and far too broad in its reach and scope. As such, the bill is not expected to pass this year. However, the Prescription Drug User Fee Act (PDUFA) and the Medical Device User Fee and Modernization Act (MDUFMA)--both considered "must-pass" legislation by industry--are up for reauthorization in 2007, and some elements from the Grassley-Dodd legislation could be included in the reauthorization legislation. During the last PDUFA reauthorization, Congress was confronted with a number of proposals to give the FDA authority to require post-market studies, remove drugs from the market, impose advertising restrictions, and provide additional and harsher criminal and civil penalties. The Vioxx and Guidant scandals may make it much more difficult to exclude some of these proposals this time around.

In early 2005, President Bush and conservative Republicans sought to reform the Medicaid entitlement program to reduce federal spending and grant states greater flexibility. Democrats and some moderate Republicans feared the plans would hurt low-income beneficiaries, and Sen. Gordon Smith (R-OR) led an effort in March to reduce the scope of intended cuts. The final bill contains provisions that would allow states some flexibility in designing benefit packages. The bill also allows cost-sharing for some Medicaid recipients and tightens restrictions for seniors trying to qualify for long-term care aid. While pharmaceutical companies were pleased that the 1bill does not increase the rebates they are forced to pay states under Medicaid, pharmacists were frustrated with changes to the reimbursement formula that would likely result in lower payments. In addition, Medicare payment rates for doctors were frozen for fiscal 2006, stopping a 4.4 percent reduction scheduled to occur on Jan. 1. But since a technical change by the Senate sent the final bill back to the House, doctors may see lower rates in early 2006 until the House returns in late January to approve the final bill for the President’s signature.

Many of the major healthcare issues that the 109^th Congress has grappled with in the first session are found in the contentious spending bill for the departments of Labor, Health and Human Services, and Education. The Labor-HHS-Education Appropriations bill for fiscal year 2006 (HR 3010) is the largest of the appropriations bills with a price tag of $602 billion. Its passage was not easy; the House rejected the first conference report on November 17 by a vote of 209 to 224, making it the first spending bill in a decade to be defeated in the House after being approved in conference. The second conference report narrowly passed the House by a 215-213 vote on Dec. 15 and passed the Senate on Dec. 21. Below are some of the key aspects of the bill:

• Rural Healthcare - This had been a major point of contention in the first conference report. The revised conference agreement called for a boost in rural health spending by $90 million over fiscal year 2005 levels.

• Medicare Prescription Drug Benefit - Provides mandatory spending of $54 billion to fund the prescription drug benefit in addition to $800 million in discretionary spending to fund the implementation of this program.

• NIH - Appropriates $28.6 billion for research and development--a 1% increase over fiscal year 2005 levels.

Included in the Defense Appropriation Bill under Non-Defense Provisions, the agreement provides $3.8 billion for pandemic flu preparedness, which is $3.5 billion less that the president had originally requested. In addition, the bill contained liability protections for those who manufacture products used to treat or prevent disease outbreaks or bioterror attacks.

1In addition to pandemic flu preparedness funds and liability protection for vaccine manufacturers, Congress will consider other incentives for drug-related research and development. For example, lawmakers will continue to work on developing BioShield II legislation. The original BioShield, passed in 2003, was the first major initiative to implement a framework to encourage and expedite the research, development, and production of bio-defense products. While industry consensus is that BioShield was a step in the right direction, many believe it was insufficient to achieve its intended goal of encouraging bio-terrorism-related research and development.

In July 2005, President Bush signed legislation that established procedures for voluntary confidential reporting of medical errors. The law (PL-109-41) aims to balance the need for information on medical mistakes with providers’ fear of liability. Information would be reported to independent patent safety organizations, which would then submit the information to a confidential national database for analysis. Data submitted cannot be used in malpractice suits.

On July 28, the House passed HR 5, a malpractice reform bill. The legislation intended to cap non-economic damages awarded in medical malpractice suits for pain and suffering at $250,000, and limit punitive damages to two times the economic damages or to $250,000, whichever is greater. The provision would also impose the same $250,000 cap on non-economic damages against drug and medical-device companies. The House has passed medical liability overhaul legislation nine different times, but the issue has yet to gain a foothold in the Senate. Sen. John Ensign (R-NV) introduced a similar bill (S 354) in the Senate that did not include a shield for drug and device makers. The House-passed bill and Sen. Ensign’s bill are still being considered by the relevant Senate committees.

In August of 2005, Congress passed HR 6, the Energy Policy Act of 2005. The president signed the bill into law (PL-109-58) in early August. The mammoth bill establishes the nation’s comprehensive, long-range national energy policy. The bill provides incentives for production of traditional energy sources such as coal, gas, and nuclear, and also for newer, more efficient energy technologies. It authorizes many new research and development programs, and encourages--but does not require--energy conservation. Efforts to mandate significantly higher automobile fuel efficiency standards failed. Specific provisions include:

• $1.8 billion over nine years for the president's clean coal power initiative. Seventy percent of those funds must be used for coal gasification technology projects — the process for converting coal partially or completely to combustible gases.
• $2.5 billion through 2013 for advanced coal-based electrical generation projects, particularly in areas that have failed to meet air quality improvements under the Clean Air Act.
• $425 million over the next five years for coal-based vehicle fuel research.

• $550 million over four years to research cellustic biomass ethanol.
• $1.4 billion over three years in construction grants for facilities that can produce renewable fuels from biomass and municipal waste.

• $1.1 billion over five years for hydrogen supply and fuel cell vehicle demonstration programs.
• $860 million over five years for fuel cell research and development.

• A cap on nuclear plant operator liability.
• $1.3 billion over 10 years for the development of advanced nuclear reactor technologies.

• Almost $3 billion in tax breaks and credits for both fossil fuel production and renewable energy production.

A month after Hurricanes Katrina and Rita devastated the Gulf Coast and damaged the country’s refining capabilities, the House introduced additional energy legislation to encourage construction of oil refineries. However, most Democrats and several moderate Republicans argued the bill would subsidize a profitable industry and would weaken environmental protections. The bill narrowly passed the House but was defeated in a Senate committee vote.

For over twenty-five years, Sen. Stevens (R-AK) has tried to open a small area of the Arctic National Wildlife Refuge to oil exploration and drilling. This year, he came close to succeeding. After being forced to remove the provision from the Budget reconciliation bill for lack of support from House GOP moderates, he included the provision in the conference report of the Defense Appropriations bill. He hoped the pending recess and pressure to pass the defense spending measure would force the measure’s passage. However, Stevens and GOP leadership did not have enough votes to stop a Senate filibuster on the bill, and the ANWR provision was removed. Stevens swore to continue fighting, and Senate Energy Committee Chairman Domenici (R-NM) suggested attaching an ANWR provision to the coming year’s reconciliation bill.

1Legislation to rewrite the Clean Air Act failed to gain traction in Congress during 2005. The latest version of the legislation, called "Clear Skies" by the White House, stalled in the Senate Environment and Public Works Committee after failing to gain support from Sen. Lincoln Chafee (R-RI). The legislation would create a market-based, "cap and trade" framework to limit emissions of sulfur dioxide, nitrogen oxides, and mercury. Excessive polluters would be able to purchase credits from companies and utilities that reduced their pollution levels below federal standards. While coal utilities and many in industry supported the bill, some environmentalists and Democrats wanted the legislation to include a cap on carbon dioxide. Sen. Chafee joined with Democrats to defeat the bill in committee after the committee leadership refused to negotiate on carbon dioxide emissions. If the administration decides to move forward with the initiative in 2006, the committee will have to find a compromise on this issue.

House Resources Committee Chairman Richard Pombo (R-CA) introduced a measure last year to amend the Endangered Species Act, first enacted in 1973. Pombo argued that the bill’s provisions--which would revise scientific standards used in setting policy, remove the federal government’s power to protect certain habitats, and compensate affected property owners--would update the law and improve its effectiveness. Several Democrats supported the measure in committee, and the bill was passed by the full House in late September. However, Sen. Chafee, who chairs the Senate subcommittee with jurisdiction over endangered species, declined to consider the bill until further study was completed regarding critical habitats. This study is expected to be completed in the early months of 2006.

With oil and gas prices rising after Hurricane Katrina, Senators from the Northeast scrambled to supplement funding to LIHEAP, the Low Income Home Energy Assistance Program, which helps low-income households pay home energy costs. $2.2 billion was appropriated in the Labor-HHS appropriations bill, the same amount as in fiscal year 2005. Sen. Stevens attached supplemental LIHEAP funding to his Defense Appropriations provision to allow drilling in the Arctic National Wildlife Refuge. When the ANWR drilling provision was stripped from the Defense Appropriations bill, the supplemental funding for LIHEAP was removed as well.

The Senate, on its last day in session, approved a defense authorization bill which grants pay raises and new benefits to service members and emergency spending for ongoing military operations. The bill had been delayed for months because of a controversial amendment inserted by Sen. McCain (R-AZ) that would ban U.S. forces from abusing detainees in the war on terror. The president threatened to veto any defense bill that included the torture provision up until mid-December. However, the president did not have sufficient votes on Capitol Hill, and he was forced to compromise with McCain. Another amendment to the bill requires classified and unclassified quarterly reports to Congress on progress in Iraq.

The bill authorizes the Army to increase its strength by 10,000 soldiers to 512,400 and the Marine Corps by 1,000 to 179,000 in fiscal 2006. But because the military is struggling to meet recruiting targets, the bill also provides numerous pay and benefits enhancements, including a 3.1 percent pay raise and increased recruitment bonuses for the Army.

The final conference report did not include an amendment adopted by the Senate that would require the White House to inform the Congress of secret CIA prisons.

The $453 billion defense appropriations bill included $50 billion in supplemental funding for military operations in Iraq and Afghanistan, $3.789 billion in emergency funding for avian flu protection, as well as $29 billion for hurricane recovery efforts in the Gulf Coast. There is already talk of $100 billion in additional supplemental funding in fiscal year 2006 for Iraq and Afghanistan.

The House passed a reauthorization bill for the Department of Homeland Security in May 2005, but the Senate was delayed in its consideration of the bill by an investigation of the government’s response to Hurricane Katrina. An authorization bill is expected in 2006.

With important provisions in the Patriot Act set to expire at the end of 2005, the White House and Congressional Republican leadership hoped to permanently reauthorize the Patriot Act. But opposition from a handful of Republican senators forced a compromise. A revised bill, reworked with White House help, passed the House in December with significant Democratic support. However, Senate GOP leadership lacked sufficient votes to stop a Senate filibuster. The Senate agreed to a six-month extension of the Patriot Act that the House later reduced to five weeks. The bill will be one of the highest priorities for Congress upon its return.

Congress has been working to reauthorize two education-related bills: the Higher Education Act, which includes federal student aid programs such as Pell Grants and Stafford loans, and reauthorization of Head Start, the childhood development program that serves almost a million low-income children. The last Higher Education authorization act expired at the end of fiscal 2003, and has been extended periodically as lawmakers have struggled to rewrite the law and overhaul parts of the financial aid system. Senate and House committees approved reauthorization bills over the summer, but they have yet to be considered by the full chambers. Before the Congress adjourned, it approved a temporary three-month extension to financial aid provisions in the Higher Education Act. Congress is expected to work hard in the first three months of the year to ensure a better chance at final passage.

Funding for higher education in the final budget reconciliation bill increases interest rates and fees paid by students and parents, and it reduces loan subsidies to lenders. It includes scholarships for low-income students who major in math, science and foreign language fields, as well as grants that reward low-income students for taking rigorous academic courses. The bill increases loan limits for students. Despite these new programs, however, most of the $12.7 billion in savings over five years from the provisions come from higher fixed interest rates and lending fees for parents and students.

The Senate committee with jurisdiction over the Head Start program approved a bill in May, and the House passed its Head Start bill in September. Chances for final passage in 2006 improved when lawmakers dropped an administration proposal that would have allowed states to take greater control of the program.

Although there was a substantial amount of legislation passed in the First Session in regards to tax policy, the Tax Reconciliation bill, the largest piece of tax legislation, will have to wait until the beginning of the second session for further action. House Speaker Dennis Hastert (R-IL) and Senate Majority Leader Frist (R-TN) have already called it a highest priority in 2006. Other notable issues dealt with in the 109^th Congress include tax relief for hurricane victims, pension overhaul legislation, and failed attempts at modifying social security. It increasingly appears unlikely that President Bush will push for a major revision of the tax code. Recent remarks by White House officials have indicated that the president will concentrate instead on persuading Congress to extend the tax cuts already enacted in 2001 and 2003 (PL 107-16, PL 108-27). The mid-term elections in November will play a major role in shaping policy for the upcoming year.

The Senate passed its $57.8 billion tax bill (S 2020) on Nov. 17 while the House passed its own version (HR 4297) valued at $56.1 billion on Dec. 8. The House version includes a two-year extension of the dividends and capital gains tax cut which is not included in the Senate version. Negotiations on investment tax breaks, tax increases for oil companies and other differences between the House and Senate versions have to be resolved by a House-Senate conference committee early this year.

Hurricane Katrina hit the Gulf Coast on August 29, and as of Sept. 21, Congress had approved $62 billion in aid to victims of the storm. On Dec. 16, Congress passed a second round of tax breaks valued at $7.8 billion. This will create "Gulf Opportunity Zones" in the region to supply tax breaks to businesses and tax-exempt bond authority to Louisiana, Mississippi and Alabama.

As of early December, pension reform legislation appeared to be a forgotten issue, but on Dec. 15, the House passed its pension bill to join the companion legislation passed in the Senate on Nov. 16. Lawmakers will meet early this year to reach a compromise between the House and Senate versions. Meanwhile, a provision to increase the premiums paid by employers to the Pension Benefit Guaranty Corporation (PBGC), the federal agency that insures private pension plans, was included in the conference report on the budget reconciliation package (S 1932). The House is expected to clear this bill after it returns Jan. 31.

It appears that efforts to overhaul Social Security will be put on hold for the time being. In November, House Ways and Means Committee Chairman Bill Thomas (R-CA) dropped his proposal to include Social Security overhaul as part of a broad "retirement bill" he hopes to craft. Thomas also left Social Security out of a substitute amendment he offered to replace the pension overhaul bill (HR 2830). It does not appear that Social Security will be a major agenda item with Congress this year because of the mid-term elections.

The 109^th Congress continued to push through free-trade agreements in the first session, this time with the Central American countries of Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua, and a related accord with the Dominican Republic (CAFTA). This is in addition to agreements that have been signed in recent years with Chile, Singapore, Australia, and Morocco under fast-track approval guidelines. Congress is currently working on trade agreements with Panama, Thailand, and Andean countries which could be passed in the second session. The passage of the Miscellaneous Trade Bill will certainly be a topic of high priority this year.

CAFTA-DR eliminates customs duties on all originating goods traded among the participating nations during a 10-year period. The agreement also eliminates export subsidies on agricultural goods. The bill narrowly passed the House on July 28 by a vote of 217-215 and later in the day passed through the Senate 55-45. Contentious issues included human rights standards in the countries as well as opposition from textile and sugar producing states. Bush signed CAFTA into law on August 2.

The bills included in this piece of legislation are typically duty suspensions on narrowly defined products but can be on any trade matter. This Congress, the Committee on Ways and Means set a filing deadline of April 28, 2005 to introduce legislation. The bills were sent to the International Trade Commission and those meeting the ITC’s approval were returned to the Committee to be included in the Miscellaneous Trade Bill. It is unclear where this issue currently sits on Chairman Thomas’ calendar, but its passage should be a top priority in the second session.

The Continued Dumping and Subsidy Offset Act (CDSOA), otherwise known as the Byrd Amendment, takes duties collected when countries illegally dump subsidized goods in the United States and diverts the money directly to negatively affected U.S. companies instead of the U.S. Treasury. The Byrd Amendment became law five years ago as part of an agricultural spending bill, but since that time the World Trade Organization has found that it violates global trading rules. The amendment’s repeal was included in the Budget Reconciliation package which passed the Senate with Vice President Cheney’s tie breaking vote on December 21. The House has already voted to repeal the amendment in nearly identical legislation. Its repeal could be finalized when the House returns in late January to vote on the amended Budget Reconciliation bill.

A border security bill passed by the House on Dec. 16 would for the first time make illegal immigration a criminal offense, rather than a civil one. The bill would also increase penalties for a number of related offenses and would mandate a program called "Basic Pilot" that companies use to check a job applicant’s immigration status. However, the bill’s future in the Senate is far from certain. A Senate version is likely to include a "guest worker" program that President Bush supports but that Rep. Tom Tancredo (R-CO) and the Immigration Reform Caucus does not. In addition, the House has yet to vote on one of Tancredo’s major efforts: an amendment that would end "birthright" citizenship--the principle that every child born on U.S. soil is an American citizen. Some Republicans believe automatically granting citizenship to the children of illegal immigrants enables and encourages whole families to immigrate to the United States. Other Republican Party officials, notably Republican National Committee Chairman Ken Mehlman, are leery of efforts that could be construed as "anti-immigrant" and that could damper GOP outreach efforts in immigrant communities. Rep. Tancredo also wants the House to consider a measure that would build a fence along the border and order the military to guard it.

Sens. McCain (R-AZ) and Kennedy (D-MA) have proposed their own immigration reform bill, which seeks to strengthen border security but also create an "Essential Worker Visa Program." New temporary visas created under this program would allow those who do not qualify for current visas to work in the U.S. for a period of three years, with a possibility of extension after that time. In October, Sen. Hagel (R-NE) introduced a package of four bills that sought to strengthen immigration enforcement and border security, reduce the backlog of visa applications, establish an electronic worker verification system, and create a temporary guest worker program for low-skilled foreign workers.

Congress passed two important laws this year which limit class action lawsuits and alter bankruptcy laws. The first piece of legislation (PL 109-2), signed by President Bush in February, gives federal courts jurisdiction over class action lawsuits when a large portion of plaintiffs live in a variety of states and the total amount in dispute exceeds $5 million. The legislation was a major victory for business groups because federal procedural law is considered less plaintiff friendly. Congressional Republicans had attempted to pass similar legislation for the past six years. The second law (PL 109-8) capped an eight year effort by Republicans to overhaul the nation’s bankruptcy laws. The legislation was strongly supported by credit card and finance industries. It strengthens the rights of creditors by making it more difficult for consumers to avoid repaying debts by filing for bankruptcy. The bill uses a means test to determine what section of the bankruptcy code consumers can use. The bill was signed into law by the president on April 20.

The appropriations cycle this year was interrupted by hurricanes Katrina and Rita. The hurricanes managed to derail GOP plans to pass all spending bills before the end of the fiscal year in October. Considering that the House passed all 11 appropriations measures before recessing in August—the first time this has been done in nearly two decades—the goal actually seemed realistic. As it turned out, Congress worked frantically on the bills right up to the Christmas weekend in an effort to finally enact all 11 appropriations measures for fiscal year 2006. White House officials hope incremental cuts to entitlement spending will achieve desired budgetary savings and generate less controversy. The budget for fiscal year 2007, which is due next month, will probably contain approximately $40 billion in cuts to entitlement programs.

The Defense spending conference report, adopted 93-0 in the Senate on Dec. 21 (PL 109-148), includes $453.5 billion in Defense spending, $29 billion in Gulf Coast rebuilding funding, and $3.8 billion in flu outbreak preparedness. It also includes an amendment by Sen. McCain regarding detainee-treatment. The bill does not contain a provision spearheaded by Sen. Stevens, R-Alaska to open the Arctic National Wildlife Refuge (ANWR) to oil drilling, nor does it contain emergency funding for the low-income heating energy assistance program (LIHEAP) which was tied to ANWR’s passage. On Dec. 22, the House adopted an enrolling resolution that also stripped the ANWR provision and sent the bill to the president’s desk for approval.

The Labor-HHS-Education Appropriations bill for FY 2006 is the largest of the appropriations bills with a price tag of $602 billion. Its passage has not been easy. The House rejected the first conference report on Nov. 17 by a vote of 209 to 224, making it the first spending bill in a decade to be defeated in the House after being approved in conference. The second conference report narrowly passed the House by a 215-213 vote on Dec. 15. The bill has been signed by the president (PL 109-149). The bill provides $14.8 billion to the Labor Department, $474.1 billion to the Health and Human Services Department and $56.5 billion in discretionary spending for the Education Department. Additional funding includes $47.1 billion to be provided to the Social Security Administration.

The appropriations bill was signed into law by the president on Nov. 10 (PL 109-97). It provides a total of $101 billion in funding. The bulk of the funding is for mandatory programs such as for crop support payments and low-income nutrition programs. In addition, $17.1 billion is for discretionary spending, $40.7 billion is for the Food Stamp program, and $12.7 billion is for school lunches and related programs.

The appropriations bill (HR 2862) was signed into law by the president on Nov. 22 (PL 109-108). It provides a total of $61.8 billion in funding. Of that total, $57.9 billion is discretionary spending. In addition, $6.6 billion is for the Commerce Department, $21.7 billion for the Justice Department, $9.5 billion for the State Department, and $16.5 billion for NASA.

The appropriations bill (HR 2419) was signed into law by the president on Nov. 19 (PL 109-103). It provides a total of $30.5 billion in funding which is mostly earmarked for Energy Department programs such as nuclear weapons management and research and development. The Interior Department receives $1.07 billion, and the Army Corps of Engineers receives $5.4 billion in funding.

The appropriations bill (HR 3057) was signed into law by the president on Nov. 14 (PL 109-102). It provides a total of $20.9 billion for foreign aid and foreign policy initiatives. The law meets administrative request for bilateral assistance for Israel, Egypt, Afghanistan, and Pakistan. It also provides increased security assistance for counterterrorism and for programs to combat AIDS, tuberculosis and malaria.

The appropriations bill (HR 2360) was signed into law by the president on Oct. 18 (PL 109-90). The bill provides a total of $31.9 billion in funding of which a third is earmarked for Customs and Border Protection and Immigration and Customs Enforcement. The Coast Guard receives $7.8 billion, the Transportation Security Administration receives $3.9 billion and FEMA gets $2.6 billion.

The appropriations bill (HR 2361) was signed into law by the president on August 2 (PL 109-54). It provides $26.2 billion in funding with $9.9 billion going to the Interior Department and $7.7 for the EPA. The bill also provides $1.5 billion in supplemental funding for veterans health care.

The appropriations bill (HR 2985) was signed into law by the president on August 2 (PL 109-55). The measure provides for $3.8 billion in discretionary spending including $785.5 million for the Senate, $1.1 billion for the House, and $560.6 million for the Library of Congress.

The appropriations bill (HR 2528) was signed into law by the president on Nov. 30 (PL 109-114). The bill provides for $82.6 billion in funding. The law provides $6.2 billion for military construction, $4 billion for family housing, and $70.2 billion for the Department of Veterans Affairs.

The appropriations bill (HR 3058) was signed into law by the president on Nov. 30 (PL 109-115). The bill appropriates $137.6 billion to fund transportation, housing programs, the federal treasury, the judiciary, and the District of Columbia. The bill includes $36 billion for the federal-aid highway programs, $8.6 billion for mass transit programs, $11.7 billion to the Treasury Department, $5.8 billion to the Judiciary, $38.2 billion to HUD, and $603 million in federal funds to the District of Columbia.

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