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Capitol Report

Coverage of legislation and regulatory activity that affects higher education

Likely Fall Legislative Agenda Is Limited

Controversial issues and the midterm elections are expected to combine to produce near gridlock on Capitol Hill for the remainder of the fall legislative season. At press time, Senate Democrats were attempting to schedule a series of votes on tax and budget legislation that will determine whether any significant progress will be made this fall on a long list of unfinished business. With time running short for legislating this year, leaders in both the House and Senate have, as expected, announced that they will convene for a lame-duck session after the election.

The politics of a lame-duck session are typically complex, and this year's dynamics are no different. Republicans are expected to make electoral gains—perhaps large ones—on Election Day, but those lawmakers won't yet have taken office. If Republicans manage to take over one or both chambers, sitting Republicans are likely to block Democratic initiatives. Meanwhile, Democrats might prefer to let a new Republican majority wrestle with difficult issues in 2011.

Tough Decisions

An example of the difficult choices that lie ahead is the proposed legislation to temporarily extend trillions of dollars in tax cuts originally passed in 2001 and 2003. At issue: whether to extend all the tax cuts, or limit the reductions to those who earn less than $250,000 per year, as President Obama has proposed. Over the next decade, extension of all the tax cuts is projected to cost about $700 billion more than the more limited legislation backed by Obama. Democrats hope to pit traditional Republican backing for tax reduction against pressure to bring down the deficit, which the GOP has pressed for this year. But this strategy could produce a deadlock rather than legislation that President Obama can sign.

If Congress can't address these tax cuts before Election Day, the issue will likely arise during a lame-duck session. At that point, lawmakers will be under greater pressure to resolve the matter, since the tax cuts are scheduled to expire at year's end.

Other tax-related legislation is expected to complicate the fall agenda. In a further attempt to stimulate the economy, the Obama administration has proposed to expand corporate deductions for investments in plant and equipment and to make the research and development tax credit a permanent feature of the tax law. In addition, a small-business jobs bill has struggled to clear the full Senate, in part due to significant differences between the two parties about how the federal government can best support these enterprises.

Health-Care Headaches

With time running short, House and Senate leaders have announced that they will convene for a lame-duck session after the election.

Beyond these differences, however, is another dispute seen as reopening the debate over the health-care reform law. Sen. Mike Johanns (R-Neb.) offered an amendment to repeal a provision of the health-care overhaul bill that expands the Internal Revenue Service's Form 1099 reporting rules. The expanded reporting requirement has been widely criticized for the extra burden it places on businesses, as well as colleges and universities. However, under the amendment, the cost of repealing the reporting rules would be offset by reductions in the spending programs authorized by the health-reform legislation. All this raises the specter of additional changes to the six-month-old law—a road that Democratic leaders on Capitol Hill do not want to take.

Stalled Spending Bills

Finally, action on the 12 annual appropriations bills funding federal agencies and programs—already well behind schedule—has formally ground to a halt. In their place are expected to be at least two short-term omnibus spending bills—one to fund the federal government through the end of the calendar year, and a second that would be taken up during the lame-duck session to provide funds through the remainder of the fiscal year. These catchall actions typically provide only limited opportunities for spending or policy adjustments to last year's funding bills.

NACUBO CONTACT Matt Hamill, senior vice president, advocacy and issue analysis, 202.861.2529