July Critical on Hill

July is looming as a critical month on Capitol Hill, as GOP leaders hope to complete the final pieces of the budget reconciliation puzzle by reaching House-Senate conference agreements on tax cuts and entitlement reform, and then pushing conference reports through each chamber. And while cooperation between the White House and GOP leaders has been the hallmark of this budget cycle, July could bring the first serious veto threats from President Clinton, possibly targeting the tax legislation and one or more appropriations bills. The administration thus far has been careful to avoid issuing the kind of veto threats that punctuated the budget process throughout the 104th Congress.

Following next week's July 4 recess, both the House and Senate plan to focus almost entirely on completing action on what they hope will be the centerpiece of this session of Congress, the balanced budget, as well as on moving ahead with the 13 annual appropriations bills for FY98. Leadership aides on both sides of the Capitol anticipate the month's floor action will be devoted in large part to the conference reports on the two budget reconciliation bills and to debating the various appropriations measures.

A massive House-Senate conference committee or else subconferences are likely to try to reach agreement on the tax cut and entitlement reform budget reconciliation plans, with the bills going to the floor after that.

The House Ways and Means Committee and the Senate Finance Committee will be at the center of the action. While the tax bills approved by the two panels have many similarities in the types of tax cuts they contain, there are several important and potentially controversial differences which could be tough to resolve.

Among the stickiest issues are whether to index taxes on capital gains, as called for in the Ways and Means bill but left out of the Finance version.

One tax source said that indexing capital gains is a "non- negotiable issue" for House Ways and Means Chairman Archer.

But Senate Majority Leader Lott said Friday that, while he agrees with Archer's desire to index capital gains, it would cost too much. Clinton last week vowed not to sign a tax bill with a capital gains indexing provision.

In addition, the Finance tax bill includes a 20-cents-per-pack hike in the tobacco tax that is nowhere to be found in the House bill.

That tax increase was added to the bill at the 11th hour during the Finance markup last Thursday night so the $15 billion that would be raised over five years could help pay for increased children's health coverage, a lower-than-proposed airline ticket tax on foreign travel, a speedier path to a higher exclusion from estate taxes and a 2 percent lower real estate depreciation recapture tax.

It was unclear what impact the tobacco industry's settlement with state attorneys general, announced on Friday, might have on the push to hike the cigarette tax or to provide additional funds for children's health coverage, since the tobacco companies are required to do that under the new agreement.

While not focusing on taxes, members of the Finance and Ways and Means panels will spend time reconciling differences between their two approaches on Medicare and welfare, while negotiators from Finance and the House Commerce Committee will try to hammer out final Medicaid language.

House and Senate Appropriations subcommittees, as well as the full committees, will continue work on the FY98 spending bills, although Republican leaders have said they may not send Clinton the bills until he agrees to the reconciliation measures.

The Senate in July also must take up the Defense Department authorization bill, which the House plans to finish this week, and extension of most favored nation trade status for China.

Meanwhile, a Senate Labor and Human Resources Committee spokesman said that Lott has told the committee he wants to bring FDA reform legislation to the floor quickly.

The committee approved the measure last week. The earliest the bill could go to the floor is the first part of July, the spokesman said.

A House Commerce Committee spokesman said that panel is hoping to bring to a conclusion talks with the administration on modernizing the FDA and reauthorizing the Prescription Drug User Fee Act in July.

And sources say House Commerce Chairman Bliley has told pharmaceutical industry officials that he hopes to have the measure on the House floor by mid-July.

It may be too early to sound the death knell for financial services modernization legislation, but the narrow approval Friday of a reform bill by the House Banking Committee may not bode well for the effort.

House Banking Chairman Leach, in a prepared statement, said while there were several "extremely positive features" of the bill his committee approved, he would "reserve final judgment" on the measure, depending on the fate of a provision that allows bank holding companies and commercial firms to affiliate.

The bill now goes to the House Commerce Committee, which has scheduled a hearing on the insurance regulation aspects of financial services modernization for Tuesday.

A committee spokesman said the panel is gearing up to "take a long, hard look" at the Banking Committee bill.

The Commerce Committee has jurisdiction only over the insurance and securities provisions in the legislation, but the House leadership must determine exactly how the bill will be carved up.

And Lott's goal of bringing product liability reform legislation to the floor in June obviously will not be realized, but it is possible a bill approved by the Senate Commerce Committee will see floor action in July.

While one Senate Democratic aide predicted there would be "talk but no action" on product liability reform in July, an industry source said floor action next month is not unrealistic given progress in recent weeks.

According to the source, the Commerce Committee report on the measure may be filed this week, giving an administration task force something to work from.

The interagency task force has been charged with helping to shape the administration's position on what will be acceptable in a product liability reform bill.

Clinton vetoed product liability reform legislation last year, but has said he will sign such a bill if certain objections he has, such as a cap on punitive damages, are adequately addressed.

A number of environmental and energy initiatives have some chance of seeing additional action in July, although the odds are not in favor of this happening.

Senate Environment and Public Works Chairman Chafee has expressed strong interest in legislation to give states the power to regulate the import of solid waste from other states, and control the flow of waste within their borders.

However, action on the measure has been delayed while the committee negotiates a bill to revise the Superfund law.

Sources would not predict when the committee might be ready to mark up a Superfund bill.

The House Commerce and Transportation and Infrastructure committees also are negotiating Superfund legislation, but no markups are scheduled.

On the energy front, House Commerce Energy and Power Subcommittee Chairman Dan Schaefer, R-Colo., last week said he may hold more hearings in July on his electricity deregulation bill.

The committee also could take up legislation to expedite construction of a temporary nuclear waste storage facility in Nevada.

Early this year, House Transportation and Infrastructure Chairman Shuster and Chafee said they planned to move reauthorization of the Intermodal Surface Transportation Efficiency Act out of committee in May and to the floor by the July recess.

But neither panel is even close to marking up a bill, much less agreeing to a strategy for reauthorizing ISTEA, which expires on Sept. 30.

Shuster put his ISTEA bill on hold after the House in May rejected his attempt to add more transportation spending to the budget resolution. Shuster believes current spending levels in the budget resolution are inadequate for a five- or six-year ISTEA bill.

Since the failed vote on the budget resolution, Shuster has been considering a variety of options for ISTEA reauthorization.

The leading alternative at this point appears to be a one-year ISTEA bill, either a simple extension of current law, or a one- year bill containing policy and formula changes that have been considered for a multi-year bill.

Shuster still has not decided on a final strategy, but will continue to meet with House members and is expected to settle on an ISTEA game plan in July.

In the Senate, the Environment and Public Works Committee is split among three competing plans for reauthorization.

While Senate supporters of more transportation spending also failed by two votes on an amendment to the budget resolution, they have no interest in doing a one-year bill.

Senators argue that if more money is found for transportation in next year's budget resolution, then the authorization levels in the new ISTEA bill can be raised with additional legislation.

But the differences of philosophy in the Senate committee are profound.

Chafee and Senate Finance ranking member Daniel Patrick Moynihan, D-N.Y., support continuing the current ISTEA program, while Transportation and Infrastructure Subcommittee Chairman John Warner, R-Va., favors a plan that benefits Southern and Midwestern "donor" states and streamlines the ISTEA program.

Environment and Public Works ranking member Max Baucus, D- Mont., who also is ranking member on the panel's Transportation subcommittee, has authored a middle-ground plan benefiting rural, Western states.

While the clock is running out on ISTEA, a bill likely will not emerge from the committee until mid- to late-July, aides said, meaning it would not reach the Senate floor until September.

The most likely scenario at this point is a joining of forces between Warner's Southern plan and Baucus' Western state plan, both of which restructure some of ISTEA's environmental programs.

The future of Amtrak also will be reviewed as the passenger rail nears bankruptcy.

Senate Finance Chairman Roth has included a $2 billion capital fund for Amtrak in his tax bill, but the House has not.

Amtrak's future will rest in the tax bill conference committee to take place when Congress returns from July 4 recess. Bills to restructure Amtrak's financial, labor and liability laws are expected to move quickly through both chambers.

Senate negotiations on the compensatory time bill are expected to continue in July, but aides said little progress has been made on reconciling differences between the Republican and Democratic versions.

Senate Republicans failed to get cloture twice on their comp time bill. The House has already passed a more moderate version of comp time than the GOP Senate bill.

Sen. Jeff Bingaman, D-N.M., is floating compromise language on the TEAM Act, which would allow employers more leeway to set up employee committees.

Because the GOP TEAM Act proposal reported out of the Senate Labor and Human Resources Committee is strongly opposed by Democrats, Republicans likely will encounter a filibuster on the Senate floor if they bring it up in July, unless Bingaman can bring some moderate Democrats on board with his proposal.

Members of the House Education and the Workforce Committee are waiting to see what will pass in the Senate before attempting to move their own bill.

July will not be devoid of action on the political front, as the House Republican Conference has leadership elections scheduled for July 16. Running for the conference vice chairmanship are Reps. Jennifer Dunn of Washington and Jim Nussle of Iowa.

The candidates for conference secretary are Reps. Deborah Pryce of Ohio, Sue Myrick of North Carolina, Jerry Weller of Illinois and Randy (Duke) Cunningham of California.

And the House, at the direction of Speaker Gingrich, intends to convene further hearings on the recommendations of the bipartisan House ethics reform task force, which were unveiled last week.

The timing for bringing the ethics report to the floor for a vote is at the discretion of the leadership; no decision had been made by late last week.