Archive for the ‘Legislative Update’ Category
By William Schoell and Jeremy Koulish
One cannot turn on the news today and not get pelted with an overload of Deep Horizon oil leakage updates and BP slamming. The president is consulting with experts so he knows whose ass to kick on this whole ordeal. So when it’s time to settle up with BP, what laws are in place to allow our government to hold BP accountable and ensure taxpayers aren’t stuck with the bill? You likely have heard about the current $75 million cap on liability for damages. So how did that cap get into place, is it justified, and what can be done to rectify the situation? The House Transportation and Infrastructure Committee held a hearing to examine these issues on June 9th.
For starters, here’s a brief overview of the current law. The Oil Pollution Act of 1990, or OPA90, was written in response to the Exxon Valdez Oil spill in 1989. This bill requires the responsible company to pay all of the damages associated with cleanup and pay economic damages related to lost incomes of newly unemployed fishermen, decreased tourism and more. The catch is that OPA90 has a liability limit for those economic damages of $75 million. That amount is utterly dwarfed by estimates for the damages related to Deep Horizon ranging from a “modest” $1-$3 billion as quoted by Chairman James Oberstar (D-MN08) to more current projections of closer to $40 billion. Clearly that $75 million cap will not do the trick when holding BP accountable on its promises to cover all costs related to the spill. Aside from the cleanup responsibilities and responsibilities for economic damages (with the cap), the bill also has created an industry-financed $150 million trust fund for emergency spending. Its purpose is to fund the Coast Guard to start containment and cleanup work before any company pays the government or starts working themselves. Problem is, the Coast Guard is almost out of that money.
Some valuable ideas emerged from this hearing, although their fate remains unclear given the institutional obstacles in Congress. A few possible actions the Congress could take are increasing the liability cap, removing the cap altogether, expanding the emergency trust fund and implementing tighter regulations on offshore drilling. At the hearing, those supportive of action seemed content with expanding the emergency trust fund and raising the cap on liabilities, although there were differences over how much to raise the cap, how much to expand the trust fund and when to pay for it. But seeing how most Americans want to see swift actions taken on this issue, these kinds of deals will most likely be worked out in the near future. Indeed, Chairman Oberstar said he hopes to see a bill on the floor and passed before the 4th of July recess.
One of the hearing’s witnesses, MIT economics professor Dr. Michael Greenstone, set forth a concise argument for why there should be no cap at all on damages. The main problem with capping damages is its moral hazard effect, in other words that it creates an incentive to ignore safety protocol and cut corners in order to save money. This is because a company knowing of a cap will not care if damages exceed the cap’s value. In this case, BP will not care if damages are $75.1 million or $75 billion; with the cap they are only responsible for $75 million. Not only does BP not care, insurance companies will only insure them up to that $75 million because the insurance company knows quite well that $75 million is all BP would be responsible for. So in effect a cap gives a company incentive to act with excessive risk because they know that they will only be responsible for the cap’s value.
One of the arguments against removing the caps (or even raising them) that served as the g0-to point for Republicans including Ranking Member John Mica (R-FL07), was the unintended consequence of small and medium sized businesses would not be able to afford insurance with raised caps or no caps at all. If the cap were raised significantly, the argument goes, companies would have to be able to pay higher premiums on more coverage, driving out smaller companies with less money.
However, regardless of the issue that barriers to entry in the oil-drilling business are already extremely high for all but the largest conglomerates, another major problem with this argument exists. As Robert P. Hartwig of the Insurance Information Institute and others pointed out, insurance companies generally price premiums based not on company size but rather on risk. It does not matter to an insurer if your company is worth $500,000 or $20 billion, the riskier the behavior the more their premiums will be. So as long any company, small or large, takes the right levels of safety precaution then no company should have a problem getting insurance. Looking at the issue a slightly different way, an efficient market for oil-drilling operations would price the full costs of unforeseen events to society into the cost of doing business. Therefore, if a company cannot afford insurance in the absence of a liability cap, drilling on oil well is not an economically viable endeavor and therefore should not be undertaken. Thus, the argument favored by most Republicans seemed oddly out of step with their traditional embrace of free market principles.
In summary, removing liability caps actually creates proper incentives for companies and insurers to act safely. As Dr. Greenstone mentioned, the goals of off shore drillers and the public are not in line, and a cap on liability only increases this effect. Without a cap, companies will be forced to place their drills in the safest areas with proper safety regulations in order to get insurance and/or avoid paying damages.
Congressman Rush Holt (D-NJ12) has introduced a Big Oil Bailout Prevention Act that would retroactively increase the cap limit from $75 million to $10 billion. In the hearing, Rep. Holt said he did not close the door on removing all cap limits, but he did not include it in the bill. That bill is matched by a similar proposal in the Senate by Sen. Robert Menendez (D-NJ), which has been brought to the Senate floor only to be blocked multiple times, first by Sen. Lisa Murkowski (R-AK) and then by Sen. James Inhofe (R-OK).
Hopefully it’s been made pretty clear on this blog and in other Carrots and Sticks materials that if we were to write a comprehensive energy and climate package of our own, we would support a cap-and-dividend approach to carbon pricing akin to that of the Cantwell-Collins CLEAR Act accompanied by a Green Bank initiative to leverage up to $1 trillion of private sector investment in the new green economy. However, the Kerry-Graham-Lieberman framework that seems to be moving now is far short of that in terms of both simplicity and effectiveness. Both Chris and I still don’t think it has close to 60 votes and this all may be a moot point, but nevertheless it’s worth working to improve the KGL language as much as possible.
Part of our climate agenda, basically a backup plan if direct cap-and-dividend doesn’t happen, is allocations or investment of climate revenues in clean transportation projects. The now-defunct CEJAPA bill did a pretty good job of this, and we’d like to see that commitment be continued in this new initiative. On Monday, Transportation for America delivered a letter to its three chief architects reiterating this request, and we are proud to be one of the letter’s 41 co-signers.
Here’s the letter in full:
UPDATE (by Jeremy): On Wednesday 3/24, the Energy and Environment Subcommittee passed HomeStar on through to the full committee with a voice vote, without any significant limits on authorization levels. It’s unclear when Waxman will take up the measure, but it should be relatively soon, probably sometime in early-to-mid April.
Some worries about Homestar getting a blank check were brought up in Thursday’s Energy and Commerce hearing. Both Rep. Upton and Rep. Pitts did not support writing the DOE a blank check to implement Homestar. For all they know, the program would be far too expensive. The Senate version caps it at 6 billion.
Rep. Upton believes the DOE is not equipped to run a program of this scale. Plus, there is still a lot of money in the stimulus that has not been spent so clearly money is not the issue. And where does Obama’s spending freeze come into play?
Another concern was brought up by Rep. Burgess who believes that a federal program would not be necessary. If people are shown how they can save money by retrofitting their homes, they’ll do it, says he. He also did not favor the blank check that would be given to the DOE by the passage of this bill.
What also brings up criticism is the fact that the bill picks winners and losers. Only certain upgrades are included under Homestar which seems to point to back room deal making.
However, even though a few concerns were expressed during this hearing, the general tone was in still favor of Homestar.
In the shocker of the new millennium, Sens. Boxer (D-CA) and Inhofe (R-DeNial) actually agree on something! For a change, Senate Democrats and Republicans in the usually hyperpartisan Environment and Public Works committee are unified in their support for action on infrastructure investment. While I wouldn’t bet my life on it, it may even be possible that the renewed push for a comprehensive and transformative surface transportation reauthorization bill can get it done this year.
Today’s hearing was the first in a series of many EPW will be holding leading up to a markup of a reauthorization of the package currently known as SAFETEA-LU. There’s good news and bad news for sustainable transportation supporters. The good news, and certainly big news is that a realistic roadmap to reauthorization seems to be emerging. Elana Schor at Streetsblog has some detail:
The Senate today took its first steps towards voting on a new long-term federal transportation bill, with environment committee chairman Barbara Boxer (D-CA) vowing to take up a successor to the 2005 infrastructure law before 2011 and indicating she would use the House’s already-introduced version as a framework.
Boxer described today’s hearing in her panel as “the kickoff” of the upper chamber’s drafting of new legislation governing U.S. road, transit, bridge, port, and rail policy. “Our intention is to hold a series of hearings and write the bill while you are still here and while Senator [George] Voinovich [R-OH] is still here,” she told Sen. Kit Bond (R-MO), who will retire at the end of the year.
“We’re going to take their bill and work from it,” Boxer said of the House, which has proposed a $500 billion plan that streamlines 108 categories of formula-based federal transportation spending into four and includes dedicated funding for metropolitan area priorities.
The hearing took place as the House prepares to vote as soon as tomorrow on a $15 billion jobs bill, already cleared by the Senate, that would extend the 2005 transport law until year’s end. Boxer and fellow senators asked the witnesses to underscore the importance of that 10-month extension in conversations with the House, where some Democrats remain reluctant to embrace the upper chamber’s jobs package.
Elana is always a great read and her blogging is highly recommended if you care about reforming the way we travel and getting off our fossil fuel addiction in America.
It was really refreshing to see committee Republicans really “rail” against inaction to fix our crumbling infrastructure. Even notorious curmudgeon Inhofe acknowledged that Groucho Bunning’s recent hold that shut down federal transpo funding for a day served to expose a growing problem of funding instability for our highways, bridges and transit systems. So maybe they’re ready to get on board with the arduous process of hammering out a full five-year reauthorization.
And make no mistake, the December deadline the Senate is now pushing is a huge plus. The White House has been advocating a wait until Spring 2011, when the Recovery Act is phasing out and the economy will hopefully in better shape. Problem is, a whole host of other obstacles would likely be present at that point. First, the economy may be in slightly better shape by then, but the chances for dramatic improvement are minimal at best. Second, Republicans are likely to pick up a substantial number of seats in the midterms, meaning it will be much more difficult to enact comprehensive reforms promoting multimodal transportation development. Meanwhile, a necessary revenue-raising measure is probably not feasible as we enter a tough campaign season for incumbents of all stripes. So what does that leave us with as the best option for action? Lame duck. A December 31st expiration would “pave” the way for such a scenario.
Despite the rarely unified tone on behalf of the committee, it wasn’t all strawberries and sunshine for sustainable transpo advocates. Most notably, all of the witnesses represent establishment state DOTs and traditional road and other asphalt interests. Nobody from the sustainability or even public transit communities. So it’s not clear whether the warm and fuzzy atmosphere of the hearing will continue once these crucial pieces of the puzzle are re-introduced into the conversation. The focus by especially Inhofe and Bond on roads and bridges, quite clearly omitting rail, bike/ped and the rest on purpose, only served to reinforce that concern. Furthermore, the gaping differences over the effectiveness of stimulus infrastructure spending, which was tilted towards those non-asphalt priorities like high speed rail, portend a rocky path ahead.
Well, Wednesday is the poorly-timed deadline. SAFETEA-LU expires at the end of September. So in case you thought Congress had enough on its hands, they have to figure out what to do about this ticking time bomb that could halt construction projects nationwide if handled poorly. Naturally, it looks like they will be taking the path of least resistance:
House transportation committee chairman Jim Oberstar (D-MN) and most members on his side of the Capitol contend that a three-month extension is needed to spur an agreement on a long-term infrastructure bill before year’s end.
But given Senate Democrats’ preference for an 18-month delay, the two chambers soon could add a one-month extension of existing transport law to the spending bill that Congress must pass by next week to keep the government funded.
Such a move would effectively postpone until October 30 the deadline for the House and Senate to reach an agreement. Oberstar, speaking on the House floor yesterday, was unmoved by the Senate and White House’s call for a long delay in reforming transportation spending.
Good for Oberstar, digging in his heels. He is fighting an uphill battle against the overwhelming power of inertia, but as a general rule on the Hill, those who yell the loudest tend to get their way sooner or later. And he is clearly yelling the loudest right now.
And like clockwork, House Republican leadership came out in full-throated opposition to the extension, blithely claiming Oberstar is just trying to buy time to build consensus on a gas tax increase. Nevertheless, the three-month extension passed the House by a whopping 335-85 margin. It looks to be DOA in the Senate, but it at least forms a decent starting point in the negotiation process. Where we go from here is anybody’s guess.
The financing piece seems to be the major stumbling block at the moment. Nobody really wants to raise the gas tax, but it is currently being seen in the conventional wisdom as the only viable option in the short term. Granted, the gas tax does solve a lot of problems: easy to administer, discourages use of inefficient vehicles, relatively stable throughout the year, and can be thought of as a user fee. Problem is, as people drive less and drive more efficient cars, they inherently consume less gas. This is clearly a desirable goal, but it also means highways don’t get repaved and rail lines don’t get built unless we find another way to pay for them.
Carrots & Sticks strongly supports consideration of alternative financing mechanisms such as Rep. DeFazio’s tax on oil speculation. We are continuing to get the word out about this idea around the Hill, and I am consulting with a handful of transportation finance experts to examine other possibilities. A visiting professor of mine at George Washington University, Swiss Transport Economist Franziska Borer Blindenbacher, has graciously agreed to share her thoughts with policymakers and relay the European experience in developing innovative transit funding sources.
In other news, the Boxer draft of the climate bill will be released on Wednesday, and we are very concerned it will follow the House bill’s lead in drastically shortchanging clean transportation as a use of cap-and-trade allocations. We will be pushing for adoption of the Carper-Specter CLEAN TEA proposal, a measure that would set aside 10% of carbon revenues to fund transportation projects that reduce greenhouse gas emissions, and we have recently added this vital provision to our list of transportation objectives.
I was in the Finance Committee Health Care Markup along with my partner in crime, Jeremy, so I thought I’d pass on a few noteworthy nuggets.
(UPDATE: Jeremy was also livetweeting the events. You can find him on Twitter @jkoul.)
First, the Republican talking points of the day. (I begin with these because all the Republicans repeated them in some form. I started to wish a conductor would appear so they could sing them in unison. It would have saved time.)
1) The White House and Democratic Leadership are rushing us—all of them except Max Baucus, who is a nice guy saddled with a pushy impatient reckless party. The American people are entitled to a meticulous process, not an artificial deadline. Obama should delay, step back, take a breath, back up, and turn around.
2) This bill expands the deficit, costs too much, and puts too great a tax burden on American families.
3) This bill expands government too much. It focuses on Washington, not on a) our families b) the states c)our individualistic American culture which won’t accept a bill of this nature
4) Americans have rejected this health care legislation: didn’t you see the town halls? (often reiterated)
5) Obama made a promise not to put in new taxes on anybody who makes under $250,000 and this bill does that. Obama made a promise that anybody who likes their insurance can keep it but this bill subtly and covertly taxes people for choosing plans other than the public plan (which is odd, since the bill doesn’t include a public plan. I think maybe they were confusing the Baucus bill with HR 3200). Obama intends to break his promises and is untrustworthy.
6) “government takeover” “federally-funded abortions” (repeat as necessary)
Now you’ve got the Republicans’ basic framework. I’m offering a prize to somebody who can turn it into a doo-wop song called “Reconciliation.”
Other interesting nuggets, of a political nature:
In Grassley’s introductory speech, he said the following:
“On August 6th, the five members of this committee and I met with the President. I told Obama that I had to have him say to me that he would be willing to admit publicly that there would be no government-run plan if there was going to be bipartisan support.”
So I guess now we know where Obama’s mid-August backtracking on the public option came from.
In Rockefeller’s introductory speech, he said he was confident they could pass a bill because “…there is a kind of new spirit. We had an incredible meeting last night on our side, a very good discussion.” Now, you might think that was bad news, and that Rockefeller had been brought into the fold by Baucus. But Rockefeller is still speaking out for the public option–more strongly than anyone other than Stabenow and Schumer. Therefore, when *he* says he’s confident, and that they had a really good meeting, I take that as good news.
One last telling incident:
There was a significant dust-up around 5 p.m. Snowe started it by asking the CBO head if he would have a score for the modified mark before they voted on it. This led into a discussion of how long it would take the CBO to score the modified mark. The poor CBO head, whose people had been given 500+ amendments to Baucus’ original bill 48 hours before, said that for a preliminary scoring, like that which the CBO had done for the original Baucus bill, it would take a few days, but that for a complete, final ranking of the modified bill, it would take two weeks. This answer obviously shocked Baucus, and played right into the Republicans’ talking point of “we need to delay; the White House is too impatient; we need to do this methodically.” Baucus said “It can’t be that different than what you did for the preliminary analysis, can it?” at which point I actually began to feel sorry for him, because I realized that Baucus didn’t want delay–in fact, he *emphatically* did not want delay. I was sorry for him at that point because I realized that he had not just been delaying the process all summer on purpose; he hadn’t been acting in bad faith; for all his faults, and ties to the insurance industry, he did have a desire to get a bill out of committee and believed he could get a bipartisan bill out. That, in short, he really had been played. Unbelievable as that is to me, given that he is a 30-year veteran of the Senate and a major power broker!
And Baucus seems to be growing a bit disillusioned with his Republican colleagues. Though he was obviously still wooing Snowe, making a staffer who was reading the amendments note that one of Snowe’s amendments had been accepted rather than skipping over it, he spoke little to Grassley. Most notable of all, he shook his head in disgust over Ensign’s wingnuttery, when the Nevada senator went on and on about how the fees the bill provides for—fines to punish the people who refuse to buy insurance—are actually “taxes” in disguise, and that the proof of that is that they are collected by the IRS. Now don’t get me wrong; I don’t particularly like mandates myself, especially not in the Baucus bill, which has no public option. But fines for breaking the law *are not taxes*, and only the wingnuttish need to repeat Republican buzzwords over and over could make Ensign say they are. I thought Baucus’ willingness to show open disapproval of his Republican colleagues on television was significant.
As soon as Snowe asked the initial question about the CBO, my friend leaned over and whispered to me: “This is a wedge. She’s going to drive a wedge in,” meaning, of course, that Snowe was using the CBO’s plight as a tool to push the Republican theme of delay. Afterwards, we realized that, despite the timely nature of Snowe’s question, we really didn’t have proof that she had been acting in bad faith all along—it’s possible she simply didn’t want to vote on something that hadn’t been thoroughly analyzed by the CBO. However, I propose that it’s unlikely that she’d have no idea that the CBO would have difficulty scoring all those amendments, with all their possible interactions, on a bill of this magnitude, in a few days. Particularly since, in her introductory speech, she stated: “With more than 500 amendments, we are at the beginning not the end, and we will want the CBO to rank the final mark.” On the other hand, Max Baucus apparently didn’t know that the CBO could not do that—so anything is possible.
cross-posted and expanded on Congress Matters
Remember the stimulus package? Yeah, that seems like ancient history to me too. But even with that said, the $787 billion economic lifeline is still in the rather early stages of filtering through to the economy. As of August 21st, $208 billion (or 26.4% of the total) was available overall and $84 billion of that had actually been spent. While the so-called “shovel ready” projects most typically associated with economic stimulus have been slow to get those shovels in the ground due to the inherently slow timeframe for the approval and funding of any contracting project, other income support and direct payment programs have been quick to move. Hence, the leading department in funds disbursed so far is Health & Human Services, followed by Labor, Education and the Social Security Administration.
Of all the various programs and functions of stimulus money, I would argue none have been so immediately successful in achieving their intended purpose as the $140 billion of state fiscal relief monies. This chunk of funds was not one of the most prominent areas of the multifaceted legislation among the general public or even the activist community, and its positive effects are not generally felt in the cocktail party circuit so it doesn’t get much press coverage. In fact, you probably heard it described as healthcare and education aid. But that money has undoubtedly served to directly avert thousands of layoffs and prevent harmful cuts to programs serving vulnerable populations around the country. See, the targeted increases in federal aid allowed states to either reverse cuts to those areas or shift excess monies to other budget areas such as public safety or programs serving the elderly and disabled.
So state fiscal relief has been crucial to help states bridge the worst of the economic storm without slashing services or workforce too deeply; it’s filled about 40% of overall gaps over the time period it covers. And not only is the aid smart policy, it is very easy to administer compared to many of the other stimulus provisions. Immediately upon passage of ARRA, governors and state budget writers were able to craft their FY2010 budgets and fill midyear FY09 gaps with the full expectation that this money would be on its way. Therefore, with a few notable exceptions (ahem Mr. Sanford), most state leaders happily accepted the help on the premise that not making painful cuts is better than, ya know, making painful cuts. And the evidence of such avoided cuts in many states is quite clear.
I haven’t heard any other examples of stimulus money working quite as effectively in achieving its intended purpose so quickly. That is why I consider the $140 billion of state fiscal relief to be the most effective piece of the Recovery Act.
(Disclaimer: Until recently I was a Research Assistant at the Center on Budget and Policy Priorities and worked on this issue extensively. While my views on state budget and tax matters generally align with those of CBPP, the views expressed here do not necessarily reflect the official position of the Center.)