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As Congress headed off for its August recess, quite a few tasks were left unresolved, with the biggest by far being legislation to avert the looming fiscal cliff.
Most political watchers, including David Kelly, chief global strategist for J.P. Morgan Funds, believe Congress will come to some type of agreement regarding avoiding the fiscal cliff after the November election. As Kelly noted Monday in his Notes on the Week Ahead, without new legislation by the end of the year, “the Bush tax cuts, the temporary payroll tax cut and extended unemployment benefits will all expire just as higher Medicare taxes and both rounds of severe cuts to discretionary spending agreed to last August take effect.”
The website by the Chamber of Commerce, a pro-business lobby, offering market, legislative and regulatory news, called FreeEnterprise.com, recently released its list of the top five pieces of “unfinished business” that Congress left undone before its Aug. 3 departure—which includes, of course, a remedy to the fiscal cliff crisis.
Read on for FreeEnterprise's list of Congress’ top 5 "biggest failures":
Without congressional action, Americans will experience one of the largest tax increases in history and massive spending cuts beginning Jan. 1.
The Chamber of Commerce said that according to a study released by the Aerospace Industries Association, $1.2 trillion in automatic defense and non-defense discretionary spending cuts, known as sequestration, will reduce the nation’s GDP by $215 billion, decrease personal earnings of the workforce by $109.4 billion, and cost the U.S. economy 2.14 million jobs in just the first year of implementation.
Combined, sequestration and the expiration of the 2001 and 2003 tax cuts on income and investment will reduce GDP by 4%, according to economist and former Congressional Budget Office Director Douglas Holtz Eakin. A growing number of economists and experts say that driving off the fiscal cliff would result in a recession in 2013.
The House passed legislation to extend current individual rates for all taxpayers; the Senate in a party-line vote passed a bill to extend rates only for individuals earning less than $200,000 and couples earning less than $250,000. Though a bipartisan agreement on AMT relief was reached by a Senate panel on Aug. 2, neither chamber took up tax extenders—provisions such as AMT relief, R&D credit, and the active financing exception that either expired at the end of 2011 or are expected to expire at the end of 2012. Also, neither chamber addressed the imminent $1.2 trillion in spending cuts.
2) Trade With Russia, PNTR
As a condition for joining the World Trade Organization (WTO) on Aug. 22, Russia was required to implement a far-reaching package of legal and regulatory changes that will further open its market to imports, safeguard intellectual property, and ensure greater respect for the rule of law.
Business opportunities in Russia are expected to grow substantially after Russia finalizes its accession to the WTO. The President’s Export Council estimates that U.S. exports of goods and services to Russia—which, according to estimates, topped $11 billion in 2011—could double or triple once Russia has joined.
However, the United States won’t get the full benefits of Russia’s market-opening reforms unless Congress approves legislation establishing Permanent Normal Trade Relations with that country. Contrary to popular misconception, PNTR does not extend any “trade preferences” to Russia; rather, it exclusively benefits U.S. workers, farmers, ranchers, and companies selling their goods and services in the Russian market. The United States gives up nothing—not a single tariff—in approving PNTR.
Neither the House nor the Senate has passed Russia PNTR.
3) Cybersecurity Legislation
Members of Congress on both sides of the aisle and the business community agree that federal cybersecurity legislation is necessary and that it must optimize cyber-threat information-sharing between government and the private sector. But progress stalled because of disagreement over who should monitor the information, with opposition by business groups in favor of industry policing.
In a letter to Senate Majority Leader Harry Reid and Minority Leader Mitch McConnell, the business groups wrote that “while the sponsors of the legislation have attempted to design a voluntary framework for the designation of ‘critical infrastructure,’ the text of the bill would likely create a mandatory regulatory regime that could displace robust efforts already being made in the financial sector to combat the risk of cyber-attacks.”
The Cybersecurity Act of 2012 failed in the Senate. The House passed cybersecurity legislation in May.
4) Appropriations Bills
Congress has yet to pass a single appropriations bill to fund the government in fiscal year 2013, which begins on Oct. 1, 2012. The House has cleared six appropriations bills; the Senate has cleared none. Congress has agreed to pass a six-month continuing resolution when it returns from its August recess; however, that resolution would end at exactly the same time that Congress is supposed to start on appropriations bills for fiscal year 2014.
5) Drought Relief
More than one-fifth of the contiguous United States is experiencing an “extreme” or “exceptional” drought, and more than three-fifths is in at least a moderate drought, making the drought of 2012 the biggest since 1956. Farmers have seen their corn and soybean crops shrivel up, and ranchers are struggling to feed their cattle because of a lack of healthy pastures, water and feed. On the day it adjourned for its August recess, the House passed a $383 million drought-assistance bill to provide relief to ranchers and other livestock producers. The Senate did not take action.