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Monday, June 17, 2024

Lawrence G. McDonald: Don’t Expect Much From This Lame Duck


It’s right out there in front of us like an Iceberg on the horizon. I’m seeing more and more hedge funds and asset management firms focused on Washington DC based policy moves to come up with crucial investment decisions. There is a secular change going on, investors ignore Capitol Hill at your peril.

With this in mind, a friend of mine at DC Tripwire pointed out to me the other day, “this Lame Duck Congress has a Honey Do list the size of Texas” and they’re putting most of the “To Do’s” in to 2011.

Although Democrats have floated the possibility of considering more than 20 pieces of legislation during the upcoming “Lame Duck” session, Republicans promised voters going into the November Midterm elections that they would use their leverage to prevent the Lame Duck session from considering controversial legislation. Succinctly put, there is neither the inclination on the Republican side nor the time in the Senate to move much more than “must pass” legislation–and some of that legislation, such as the Defense Authorization bill, may also not be completed until the new Congress convenes on January 3rd.

The Senate will meet for one week beginning November 14th, but will recess the following week for Thanksgiving break, before reconvening on November 29th. What a life. I’ve always said, forget about dying and going to heaven, die and go to Congress.

No target final recess date for the 111th Congress has been set, but any Lame Duck session is unlikely to last past the second week in December–although the session could conceivably last up until Christmas. That would be unusual–but not unheard of– under the leadership of Senate Majority Leader Reid (D-NV) who has promised to stay in session “as long as it takes.” As long as it takes for what though, is the real question.

Although Democrats are likely to take up a continuing appropriations measure to fund the Federal government into the new year, as well as a short-term extension of the Bush tax cuts (including extension of a “patch” to prevent the Alternative Minimum Tax [“AMT”] from hitting middle class taxpayers).

Old Harry, the “survivor” Reid has promised more than he can deliver:

– a temporary extension of unemployment benefits,

– a vote on the repeal of the military’s “Don’t ask; Don’t tell” policy,

– a measure to delay temporarily the long-scheduled cuts in the physician reimbursement rate under Medicare (aka, the “Doc Fix”),

– the “DREAM Act” (which would grant legal residency to certain children of illegal immigrants),

– a bill to grant collective bargaining rights to fire and policemen.

In addition, before the Midterm Recess, Reid filed for cloture on three other bills:

– the “Promoting Natural Gas and Electric Vehicles Act,”

– the Paycheck Fairness Act (extending the statute of limitations for certain pay discrimination claims), and

– the Food Safety Modernization Act.

What about saving the whales?

Senator Chuck “look out Beijing” Schumer is also pushing for debate on legislation addressing Chinese currency manipulation and there is growing interest in another bill aimed at China which would seek to ensure the continued Chinese exports of certain “Rare Earth” minerals. It is unclear that Sen. Schumer will have the opportunity to bring up his legislation.

Legislation addressing rare earth minerals is likely to wait until next Congress, but there is an outside possibility of obtaining unanimous consent in the Senate to pass it. So far, Republican Leadership has given no indication that they are likely to let the bill go forward in the Lame Duck.

According to the team at DC Tripwire, other Possible Legislation includes:

– Extension of the Build America Bonds (BABs) Program. A favorite of Wall St., although there is tepid support among Republicans for the bonds which were created under the Stimulus, an extension of the BABs program could move forward in the Senate as stand-alone legislation, or Senate Democrats could try and extend the program as part of their efforts to pass a short-term extension of the Bush tax cuts.

– Extension of enhanced Federal matching dollars for state Medicaid programs (enhanced “FMAP”). In August, amid Republican protest, Congress extended the enhanced Federal match for state Medicaid programs first authorized under the Stimulus, and which was set to expire. The enhanced Federal match will expire on December 31st or June 30, 2011 depending on whether a state requesting the funds past December 31st filed a written request with HHS Secretary Sebelius for an extension of the heightened match. This has big implications for dozens of companies in the health care sector.

Currently, it does not appear that extending FMAP will come up during the Lame Duck Session.

– On the Private Equity Venture Capital front there is the Tax Extenders / Carried Interest Legislation. Although many popular tax breaks are slated to expire at the end of this year, there is no agreed-upon bipartisan way of extending the heterogeneous package of tax cuts colloquially known as “tax extenders.” Democrats have attempted to extend this package of tax breaks several times over the last year, failing in the Senate each time because of opposition to paying for the extension by increasing the effective tax on carried interest. A deal could emerge from the Senate Finance Committee, which would attach some or all of the popular tax breaks to an extension of the Bush tax cuts, but in the absence of a deal, the tax cuts may have to be taken up in the 112th Congress and passed retroactively.·

The Democratic Caucus in both chambers is still regrouping after the Midterm losses and leaders are still trying to decide which bills they will have the time and support to move.

The least likely pieces of legislation to move are: – the DREAM Act, which is tied into broader immigration reform under contemplation for the next Congress.

– legislation promoting natural gas and electric vehicles is unlikely to move unless part of more comprehensive energy legislation, also under contemplation next Congress.

– the Paycheck Fairness Act

– collective bargaining rights for fire and policemen are seen as “show votes” to highlight Democratic concerns for women and organized labor. They are not expected to pass. Further, it seems doubtful there will be enough time to debate and pass

– food safety legislation given the other agenda items on the table, although passage of food safety legislation has an outside chance of being taken up and passed.

Don’t forget if a Defense Authorization bill is held over until the start of the 112th Congress, a vote on the military’s “Don’t Ask; Don’t Tell” policy is also unlikely, as a vote on the policy is most likely to come up during amendments to the Defense Authorization.

Most likely to be attached to the continuing appropriations measure:

a temporary extension of unemployment benefits and Doc Fix legislation.

For more, check out my website

From The Huffington Post