The Policy Road Ahead — Preview of Fall 2009

04 September 2009 Publication
Authors: Theodore H. Bornstein

Public Policy News Alert

Congress returns on September 8, 2009 after an eventful month-long recess dominated by the controversy over the shape and scope of health care reform. However, that is only one of the issues that will loom large during the balance of the year. Other issues include climate change legislation, labor law reform, and the need to pass spending bills for the fiscal year beginning October 1, 2009.

Looking Toward 2010
The next 60 days leading up to the gubernatorial races in New Jersey and Virginia (in both of which the Republican candidates are currently favored to win) will kick off the 2010 election season. The entire House of Representatives and 36 U.S. Senators will be facing the electorate for the first time since President Obama’s inauguration. In the Senate, three special elections in Delaware, New York, and Massachusetts are for the replacements for the remainder of the terms for Vice President Biden and Secretary of State Clinton; there also will be a January 2010 election to replace the late Sen. Edward Kennedy (D-Mass.). The other 34 races are divided between 16 Democrats and 18 Republicans. Eight seats (six Republicans and two Democrats) will be open-seat elections.

Traditionally, the president’s party loses congressional seats in the first mid-term election — from a low of two lost Senate seats in 1954 and four lost House seats in 1962 to a high of 12 Senate seats in 1946 and 77 House seats in 1922. Only twice in the last century did the president’s party gain seats in the House (nine in 1934 and eight in 2002), and much of this change can be accounted for by public reaction to the Great Depression and the terrorist attacks of September 11, 2001. Also during the last century, the president’s party gained Senate seats in the mid-term election only three times (1934, 1962, and 1970), with the latter two times coinciding with the Cuban Missile Crisis and the Civil Rights movement.

Recent polling and some political pundits are forecasting a bad mid-term election in 2010 for the Democrats. The August town halls have taken a toll on Democrats, eroding advantages that existed just eight months earlier. The most recent poll (August 25, 2009 Rasmussen) found that Republicans held a five-point advantage over Democrats in their generic congressional ballot and have held a two- to five-percentage-point advantage over them every week for the last two months.

A recent report from noted election expert Charlie Cook found that the divisive health care debate, coupled with President Obama’s sliding approval numbers (from 55 percent in an August 9, 2009 Gallup poll to 51 percent in an August 27, 2009 poll), have created an even more difficult political environment. Mr. Cook predicts that Democrats could lose “at least 20 seats” in the mid-term elections and, with losses of greater than 40 seats, control of the House. If Democrats are able to retain the House, it would likely be with a diminished — and more liberal — House majority. Most losses in this scenario would be moderate Democrats in Republican-leaning districts who were swept to victory in the Obama wave, resulting in more polarization and gridlock.

This election season is especially critical, as it is the last election prior to the decennial census and the resulting redistricting of congressional seats. In 2010, 37 states will hold elections for governor, with 19 Democrat seats and 18 Republican seats at stake. As we have seen nationally, polling trends in a number of these contests have shown Democratic incumbents to be at risk. In Massachusetts, Gov. Deval Patrick (D) is trailing two potential Republican challengers. A recent poll has New York Gov. David Patterson (D) with very low job approval numbers and trailing former New York City Mayor Rudolph Giuliani by 20 points.

Additionally, of the 46 state legislatures up for election in 2010, 36 of these bodies will meet after the election to redraw congressional district boundaries for the next decade, which will affect 88 percent of the seats in the House. Manipulation of the districts and their political makeup can give one party a tremendous advantage in electing representatives, and both parties will work hard to gain an advantage.

As of now, 2010 is looking to be a difficult year for Democratic candidates. Action on top-priority items such as passage of a scaled-down health care reform bill — with significant support from Republicans — would go a long way toward helping improve the outlook. What would be most harmful next year would be an effort by Democratic leaders to strong-arm health care and climate change legislation through Congress without bi-partisan support, thus allowing the Republican candidates to firmly hang the increasing deficits squarely on the Democratic Party. Conversely, even moderate gains in the economy will benefit Democratic candidates and erode Republicans’ attacks and calls for change.

Health Care
Congress’ failure to pass a health reform bill before the August recess has resulted in congressional leaders pushing back President Obama’s desired October 2009 deadline for final passage. Back home in their districts, members faced angry and vocal constituents, confused by the conflicting and often misleading reports about the comprehensive legislation. Recent polls have shown a steady decline in public support for both a health reform package and, in tandem, the Democratic Party, as the coverage of angry protesters has increased. An August 9, 2009 Gallup Poll shows 49 percent of respondents disapprove of the way President Obama has handled health care policy; the worst showing of all the issue categories included in the poll.

Conflicting messages from the administration on the details of the plan — especially on the “public option” — as well as the extremely high cost of an overhaul, estimated to be around $1 trillion, has confused voters and led to declining support even among Democrats and Independents. Policy experts also note the growing criticism directed at the president’s failure to clearly articulate the need for health care reform prior to August and his decision against submitting a health care bill or at least a reasonably detailed outline of a bill that would, they believe, have blunted attacks by opponents about the contents of the various proposals.

In an effort to build public support, the president has re-labeled the endeavor “health insurance reform” and launched a campaign to organize supporters at the grass roots level, though several Democrats in Congress have said they would like to see him take more control of the debate. In response, President Obama will address a joint session of Congress on September 9, 2009 to detail his expectation for reform and seek renewed support for legislative action on the issue. Meanwhile, three prominent members of the House Energy and Commerce Committee have sent investigatory letters to insurance companies requesting details on their administrative costs, including executive compensation, entertainment expenses, and profits, presumably to counter the industry’s opposition to the legislation.

Adding to constituents’ confusion is the fact that there are several bills currently under consideration. Three separate House committees have approved two different versions of a reform bill, and the Energy and Commerce Committee may still consider nearly 60 additional amendments before the full House could vote on either version. Across the Capitol, the Senate Committee on Health, Education, Labor & Pensions (http://help.senate.gov/) approved a portion of reform legislation dealing mainly with insurance industry reforms, while a select bi-partisan group of Senate Finance Committee members is still negotiating a compromise measure addressing the more contentious issues of financing, including cuts throughout Medicare and Medicaid. Two of three Republican senators participating in negotiations — Ranking Member Charles Grassley (R-Iowa) and Senator Mike Enzi (R-Wyo.) — have made public statements during the recess indicating that they may abandon negotiations after the Senate returns. It is not clear what — if any — compromise will emerge from these negotiations.

With the lack of any Republican support, Democratic leadership in the Senate is considering the possibility of splitting a reform package into two separate bills. One bill would concern health care industry reforms like requiring insurance coverage and would follow normal Senate procedure, which requires 60 votes to limit debate and proceed to a vote. Leadership could push the second bill, which would include revenue raisers and possibly a controversial public health insurance option, through the Senate using a tactic called “budget reconciliation,” which protects the bill from filibuster and requires only 51 votes to pass.

The effect of the August 26, 2009 death of Senator Ted Kennedy (D-Mass.) on the debate remains to be seen. Many senators have already expressed a desire to continue the push for meaningful health reform to honor Senator Kennedy’s career-long campaign for national health insurance, but Republicans thus far seem unmoved while the cost of the bill remains high.

The final contents of both the House and Senate versions of these bills are unknown at this time and may remain so for much of September. Moreover, the outlook for any health reform package is dependent on the ability of the White House and the Democratic congressional leaders to recover from August’s setbacks. The leaders face two hostile sets of Democrats; moderates, particularly those in the House from competitive districts, will want to jettison the public insurance option and scale back the whole bill, and the sizable bloc of House liberals who believe the public option is the heart and soul of health care reform and who might oppose any bill that does not include it. Finding a way to satisfy these groups may be impossible, but they will try.

Energy and Environment
The discussion about climate change is heating up with major disagreements over lowering emissions and a cap and trade program. In addition to the normal political party debates, legislators are being pressured from interest groups and businesses that are using town hall meetings, letters, television ad campaigns, and social networking to influence their decisions.

The House passed its version of the Energy/Climate legislation (HR 2454) on June 26, 2009. The Senate is considering the energy and climate change issues in two separate bills with Democrats hoping to combine the legislation into one bill on the Senate floor. The House bill calls for reducing greenhouse gas (GHG) emissions 20 percent below 2005 levels by 2020 and a cap and trade program. Several Senate Democrats and environmental groups want GHG percentages raised and a stricter cap and trade program.

Sen. Barbara Boxer (D-Calif.) plans to release a draft version of the climate bill later in September 2009. Majority Leader Senator Harry Reid (D-Nev.), who had set a September 28, 2009 deadline for the bill, said recently that he expects the Senate will have plenty of time to consider the issue before the end of the year. However, health care reform stands in the way, and he still faces opposition from members of his own caucus.

Moderate Democratic Sens. Byron Dorgan (N.D.), Kent Conrad (N.D.), Blanche Lincoln (Ark.), and Ben Nelson (Neb.) have announced they believe the climate bill should be set aside in favor of a narrower energy bill. Senate Committee on Energy and Natural Resources Chairman Jeff Bingaman (D-N.M.) and Ranking Republican Lisa Murkowski (R-Alaska) also have backed a similar plan. Any energy/climate change bill in the Senate would have to get 60 votes to move forward, and a bill that is seen as too extreme would face an uphill fight, especially without the votes of these senators.

When the House debated cap and trade, there were some energy industries that stood on the sidelines, expecting others to do their bidding or expecting the process to flounder. The likelihood of serious consideration in the Senate has increased the sense of urgency. Those representing the traditional energy sources and those betting on the future are in the debate this time, both lobbying the Senate and the American public.

Unions and environmental groups kicked off a 22-state campaign. The World Wildlife Fund has begun television ads in five states home to senators still undecided on the climate change bill: Alaska, Indiana, Maine, Montana, and North Dakota.

Conversely, Energy Citizens — an alliance of the American Petroleum Institute, American Farm Bureau Federation, the National Association of Manufacturers, and others — is holding rallies in 20 states to activate farmers and employees against climate change legislation.

The outlook for a combined energy/climate change bill is unclear. Republicans in both chambers are fighting climate change vigorously and have business, traditional energy, and agriculture on their side. Democrats do not yet have 60 votes in the Senate for climate change provisions, and freshman House Democrats are being challenged in their districts on their climate change votes.

However, if the legislation should be split into two, with one bill focusing on energy issues and the other on climate change, this could improve chances for passage of the energy section as the House and Senate are not that far apart. Should it be decided to have an energy-only bill, the outlook for such a bill would be quite good as it could possibly be passed and signed before the end of the year. The timing would only be dependent upon the completion of the health care legislation. Climate-change-only legislation would face a very uncertain future in 2010.

Labor Law
Efforts to change the way workers can unionize at their workplaces have stalled in Congress and may not come up until next year at the earliest. Passage of the Employee Free Choice Act (EFCA), or the card-check bill, was the premier goal for labor union leaders in this Congress as this bill has been thwarted since Democrats regained control in 2006. With new large majorities after the 2008 election, and with a new ally in the White House, hopes rose that the bill could finally become law.

However, the fate of the EFCA bill remained extremely unclear as the Senate recessed on August 7, 2009. The original bill, which would change current law to allow labor unions to form locals if a majority of employees signed cards to that effect, was blocked in the Senate when it was clear that the measure could not overcome a possible filibuster. Since that time, discussions among Senate Democrats to reach a compromise on EFCA have been ongoing. However, they have not yet reached a deal and talks seem to have bogged down recently.

According to congressional leaders, legislative measures to reform current labor law have been put on the back burner until later in 2009 at the earliest and may not come up at all this year. The EFCA bill is not on the schedule for floor consideration in either the House or the Senate this year. Instead, the Senate will focus on the issues of health care reform and climate change legislation for the balance of the year. Senate leadership will not bring up a bill until there is a compromise that can get 60 votes to overcome cloture. Several moderate senators from southern states are very troubled by the entire issue and how it might affect them politically in the next election and want no part of it going forward. The House will not act on the legislation until the Senate has acted, according to leadership staff, as promises have been made to moderate Democrats who do not wish to be forced to cast a difficult vote.

Another signal confirming the delay on EFCA is that labor unions have turned their attention during August away from labor reform and to the roiling debate over health care reform. A report in the August 27, 2009 edition of The New York Times details the efforts of the leader of the powerful Service Employees International Union (SEIU) to push for passage of the health care reform package through Congress. The work on health care by the unions in place of efforts on EFCA during this recess period indicates that the unions are resigned to the fact that no bill will emerge this year.

The outlook for the bill is not good for 2009 unless an agreement can be reached. However, without significant pressure to pass a labor reform bill, senators are unlikely to move ahead unless there is a clear political benefit — or danger — to be had.

Fiscal Policy — Appropriations, Taxes, and Other Issues
Action on the 12 Fiscal Year 2010 appropriations bills is likely to dominate the Senate’s floor time as Congress returns with only 15 legislative days left until the end of the current fiscal year. Senate Majority Leader Harry Reid told reporters that he was optimistic that four more spending bills could be passed by October 1, 2009, and informal conference work between House and Senate appropriators has begun on four other bills, which could result in votes shortly after Labor Day. The House has passed all of its appropriations bills as of July 30, 2009.

Senate Committee on Appropriations Chairman Daniel Inouye (D-Hawaii) has noted that the next bills to come to the floor for votes were likely to be the Commerce-Justice-Science bill and the Interior bill. The only bill that has not had a markup as of now in the full Committee is the Defense measure.

However, this large workload means that the Congress will have to pass at least one continuing resolution to temporarily fund other areas of the government while the other spending bills are completed. Democratic leaders and appropriators are still hoping to pass all 12 appropriations bills through regular order, avoiding the need for a large omnibus spending measure. However, if time runs short due to other legislative pressures, that possibility cannot be discounted. Members must be careful in crafting their spending packages as recent opinion polls have revealed serious concerns of most Americans about large deficits and exploding federal debt. Those concerns will only intensify during the next year leading up to the election due to worries about the cost of health care reform and government estimates that show that the budget problem has worsened considerably.

In the tax area, a package of tax extenders is set to be assembled by the House Committee on Ways & Means and Senate Finance Committee this fall. A number of items could be included in this measure, including extending the expiring federal estate tax break, special deductions to individuals for tuition and teachers’ out-of-pocket expenses, the research-and-development tax credit, and business tax breaks. Another area of possible action is a push by realtors and builders to expand the first-time homebuyers’ tax credit to all homebuyers and extend the program to November 2010. Observers note that the passage of pay-as-you-go legislation will limit any extensions to one year only and push many provisions into a bigger debate on taxes slated for next year.

A last legislative area to watch is that of the highway reauthorization, which expires on September 30, 2009. House Transportation and Infrastructure Committee Chairman James Oberstar (D-Minn.) is seeking to pass the bill this year, but Senate leaders are against such quick action, instead preferring an 18-month extension. However, if the economy does not recover as hoped, this bill could be looked to as a de-facto “second stimulus” bill and moved ahead to provide another jumpstart.

In a different area important to food producers and retailers, Sen. Reid said that the chamber also will take up a version of food safety enhancement legislation shortly after senators return. The bill (HR 2749) passed the House on July 30, 2009 and would institute major changes in the way the FDA regulates the industry. The bill calls for creation of a food-tracing system to help track disease and tainting, implementation of mandatory food quarantines, and registration of food facilities with the FDA and fees associated with that action.

The Senate version (S. 510) sponsored by Sen. Dick Durbin (D-Ill.), would instead assess fees on manufacturers who violate the law or importers who voluntarily pay in order to expedite food inspections. This bill is expected to serve as the base bill for Senate debate, rather than the House-passed version.

The outlook for enactment of food safety legislation at this point is tentative. The House and Senate versions must be reconciled in terms of food facility registration fees and written food safety plans. While the Democratic leadership wants to move the legislation this fall and the issue has become a priority for the White House, its fate also will depend on the status and progress of health care and energy/climate change legislation, both of which are considered higher priorities.


Public Policy Alert is part of our ongoing commitment to providing up-to-the-minute information about pressing concerns or industry issues affecting our clients and our colleagues. If you have any questions about this alert or would like to discuss these topics further, please contact your Foley attorney or the following:

Ladonna Y. Lee
Washington, D.C.
202.295.4107
llee@foley.com

Theodore H. Bornstein
Washington, D.C.
202.945.6188
tbornstein@foley.com

Philip G. Kiko
Washington, D.C.
202.672.5509
pkiko@foley.com

Robert C. Geist, Jr.
Washington, D.C.
202.295.4090
rgeist@foley.com

Michelle A. Leeds
Washington, D.C.
202.295.4123
mleeds@foley.com

Cynthia M. Villareal
Washington, D.C.
202.627.5419
cvillareal@foley.com

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