WASHINGTON’S LABYRINTHINE WAYS

o Vice-President Cheney’s Tie-Breaking Vote Enacts Third Largest Tax Cut in History. Senate approval enacted $330 billion in tax cuts, less than half of President Bush’s original $756 billion proposal. Almost straight party-line voting has become the new norm. Inclusion of $20 billion for fiscally strapped state and local governments secured the final votes. The cuts include an immediate but temporary increase in the child tax credit for some, temporary elimination of the marriage penalty, and reductions of taxes on dividends and capital gains. Other changes involve slightly lowering current income tax rates and expansion of the 10 percent tax bracket.

o Will Tax Cuts Achieve Their Stated Objectives? The President maintains they will stimulate the economy by spurring consumer spending and business investment, particularly for small firms. Opponents contend the temporary, short-term cuts appear mainly designed to appease voters for the upcoming elections. Turning tax reductions into spendable cash for consumers may be difficult. Economists appear divided over their actual economic impact.

o Debt Ceiling Grudgingly Increased to Accommodate Tax Cuts Creating Largest Deficit in History. Cutting taxes while on a war footing and undertaking the rebuilding of Iraq generated considerable criticism and required an unpopular vote to increase the national debt. The debt limit is now at a record $7.4 trillion. Republicans quietly maneuvered the needed $984 billion increase hours after enacting the cuts amid publicity for the reductions, thereby frustrating Democratic efforts to play up the deepening deficits being created.

o New Battle over Restoring Increases in Tax Credits for Child Care for the Working Poor. Few members except those drafting the tax cut Conference Report knew the final details before voting. Only afterwards, did members learn that 11.6 million children from families with incomes between $10,500 and $26,000 had been excluded from the expanded child care credit (increased to $1,000 from $600) to be given to all other families earning up to $150,000. As a tax credit, those unable to use the deduction receive cash payments. The Senate quickly restored the credit to all families without further revenue losses by closing some corporate loopholes. Tom Delay, the House Majority Leader, however, conditioned restoring the cuts on adoption of an $82 billion measure containing additional tax cuts Republicans want in a House bill that has sent the issue to a Conference Committee. Even if a compromise is accepted, these working poor families most needing the funds will not get cash payments now being prepared for the mostly wealthier families until next year. With many members vowing not to increase the deficit further, passage seems unlikely.

o Treasury Department Report Warning of $44.2 Trillion Deficit Kept Out of 2004 Budget Report. A Treasury Department report that showed the United States faces future federal budget deficits of more than $44.2 trillion was suppressed. The increasingly deepening deficits now being run up will have severe consequences for baby-boomers’ healthcare and retirement costs. If the cuts that expire within nine years are made permanent, the deficits would even be worse. London’s Financial Times that revealed its suppression says the report advises that to close this gap in the future would require the equivalent of a permanent 66 percent across-the-board income tax increase. When will the day of reckoning arrive?

o Supreme Court Rules Fair Housing Act Does Not Create Vicarious Liability for Corporate Officers. In Meyers v. Holley, 537 U.S. 280 (2003), the Court determined that officers of real estate corporations are not personally liable for Fair Housing Act violations without individual fault. The Court in reversing the Ninth Circuit held that while the company could be found liable for improper acts of its salesmen, without evidence of actual misconduct by the company president, officers could not be found vicariously liable. The Court noted HUD regulations disclaimed making corporate "power to direct or control" a basis for liability. The decision provides some encouragement for real estate businesses not to operate as partnerships since partners would still be liable.

o While Approving Many Federal Judicial Appointments, Democrats Continue to Filibuster Two Symbolic Conservative Court of Appeals’ Nominees. Despite repeated votes to cut off debate by the Republican majority, a sufficient number of Democrats have continued to deny the Administration the sixty votes needed to confirm two nominees to federal courts of appeals, Miguel Estrada and Priscilla Owen. Overall, however, most of Bush’s nominees are obtaining hearings and more than 126 have been confirmed by the Senate. Republican frustration over the filibusters, however, led to Senate Rules and Administration Committee hearings to consider alternatives to the current confirmation process. An upcoming Senate vote on exempting judicial appointments from filibusters is unlikely to pass. Of course, what goes around comes around again.

o House Ethics Committee Reverses Republican Relaxation of Ethics Restrictions. In January, the House GOP leadership, with little consultation, loosened ethics restrictions on members’ acceptance of gifts. Lobbyists were allowed to provide catered food to staff, the so-called "Pizza Rule," so long as the food did not exceed $50 per person. The annual $100 cap still remained, however. In addition, members were allowed to travel to resorts for events put on by charities linked to special interests. In April, the Ethics Committee issued new guidelines tightening up the restrictions, warning, "Food must be refused entirely if the person offering it has a direct interest in the particular legislation or other official business on which the staff is working at the time." Now resort travel cannot be accepted "if those expenses would be paid using donations that were earmarked, either formally or informally, for payment of congressional participants."

o In a Reversal of His Recent Votes, Justice Rehnquist Provides the Critical Vote to Apply the Family and Medical Leave Act to States. While generally exempting states from federal requirements on employers under the rubric of states rights, such as with ADA and Age Discrimination, Justice Rehnquist authored a 6-3 decision approving application of Leave Act protections to state employees. The decision affirms Congress’ authorization of suits against state governments under the Act that guarantee unpaid leave to workers needing care for young children or ailing relatives. Overriding arguments based on state sovereign immunity, he found Congress had made the case for federal regulation given the evidence of gender discrimination shown. In the context of "heightened scrutiny" applicable to gender and race discrimination, he wrote Congress justified exercise of its constitutional powers.

o Court of Appeals Stays Work of Special Master in Indian Trust Fund Litigation. Following oral argument in an appeal from a contempt finding against Interior Secretary Norton, the court ordered Joseph Kieffer III, the special master appointed by District Court Judge Lambeth, to halt work in the matter pending further order of the court. The master’s criticism of Norton contributed to the district court’s contempt finding against her. She is the third Interior Secretary Judge Lambeth has found in contempt for failing to manage properly what plaintiffs claim are over $11 billion in Trust Funds augmented by $500 million annually from oil, timber, and grazing lands belonging to some 300,000 Native Americans.

o Oral Arguments Indicate Court of Appeals Unlikely to Intervene to Prevent Release of Cheney Energy Task Force Documents Ordered by District Court. While GAO abandoned its efforts, the Sierra Club and Judicial Watch (somewhat strange "bed-fellows") have persisted in seeking records of energy industry participation in the Task Force. The trial court issued a discovery order and Cheney filed an interlocutory appeal by writ of mandamus. The Washington Post reported that at the mid-April oral argument, comments from the court suggested it would not intervene, including a strong statement by Judge Harry Edwards suggesting Cheney "had no case," and there was no showing of irreparable harm sufficient to justify appellate court action.

o Congress on Verge of Exempting Gun Dealers and Manufacturers from Tort Liability. The House passed immunity for gun dealers and manufacturers, and with fifty-two Senate co-sponsors of similar legislation, it appears the gun industry may be about to secure immunity from tort suits, such as those currently pending brought by local governments and victim’s families.

o House Passes Ban on $6 Billion in Web-Based Gambling. In June, the House passed legislation that would prevent credit card payments or wire transfers to cover debts that losers owe offshore Internet gambling sites. The ostensible purpose was to curb betting, particularly by some estimated 5 million underage gamblers in the United States. In 2001, over 1,500 sites overseas collected about $6 billion in bets.

o Hope VI Housing Program Being Rescued. The House Financial Services Committee approved bills likely to receive congressional approval to: re-authorize the expiring HOPE VI program through 2005 and encourage its use in smaller communities; create a new authorization of $200 million for down payment assistance over the next two years for the HOME program, providing special eligibility for uniformed local government employees and teachers (allowing those with incomes up to 115 percent of area median rather than the normal 80 percent to qualify); and, make CDBG funds eligible to build tornado shelters in communities with manufactured homes, often referred to as "tornado magnets."

o Many States in Fiscal Difficulty Despite Making Steep Cuts. The National Conference of State Legislatures has reported that soaring health care costs, lagging tax revenues, and failure of the federal government to fully fund mandates imposed on states have resulted in budget deficits in twenty-six states and D.C. for fiscal 2003 that ends June 30 for all but four states. The cumulative deficit is $21.5 billion. Six states, ranging from California to Oregon, each has a deficit of over $1 billion. Fiscal 2004, starting in July, has an even more grim outlook. D.C. and twenty-seven states expect an aggregate deficit of $53.5 billion, with ten states having deficits over $1 billion. Many cuts proposed for 2004 will reduce support for public education and medicaid. Insufficiently funded federal mandates have cost states $83 billion in four areas alone: special education, "No Child Left Behind" programs, election reform, and homeland security costs.