25 problems facing Obama, Congress

A slew of thorny issues awaits President Obama and Congress in the lame-duck session, ranging from taxes to defense to Medicare. 

{mosads}Obama’s victory increases the chances that the lame duck will be productive, but it remains to be seen if the president and leaders on Capitol Hill can break the gridlock that has gripped the 112th Congress. 

The following are 25 policy matters most likely to be addressed in the coming weeks. 

Expiring Bush-era tax rates

House Speaker John Boehner (R-Ohio) quickly sought to define the terms of this debate, saying on election night that Obama’s victory is not a mandate to raise taxes. But Obama clearly has leverage, especially because the 2001 and 2003 tax reductions expire at the end of the year. Obama has vowed not to renew the tax reduction for families making more than $250,000 a year; the GOP wants all the reductions extended. Despite the rhetoric, a compromise at a $1 million threshold could be reached. Another possibility is extending the Bush rates temporarily in exchange for future tax revenue increases as a part of tax reform. 

Sequester

Under the terms of the August 2011 debt-ceiling deal, $109 billion in across-the-board spending cuts is set to hit in January. Defense would take a $55 billion hit. Congress will look to replace at least this first slice of $1 trillion in 10-year cuts with targeted cuts to mandatory spending and possibly tax increases. A “grand bargain” replacing all the cuts and tax increases in the fiscal cliff is probably not entirely feasible in the lame duck, but a framework for future action in 2013 could materialize. 

Hurricane Sandy supplemental spending bill

The damage from Sandy will still be big news when Congress returns next week. Forty-four members of the House signed a bipartisan letter urging leaders to be prepared to increase the federal disaster relief fund’s $7.1 billion budget. 

Alternative Minimum Tax patch

Unless Congress acts, millions of middle-class earners will come under the umbrella of the AMT for the current tax year. Indexing the AMT exemption for inflation retroactively would be a nightmare, so some form of AMT patch is highly likely in the lame-duck session.

Capital gains tax rate

After Dec. 31, the tax rate on investments held for more than one year will rise for middle-income and higher-income earners, from 15 percent to 20. Obama wants to preserve the rise for higher-income earners. Some Republicans want the rate dropped to zero to spur investment.

Medicare doc fix

Unless Congress acts, Medicare payments to doctors will be slashed by 27 percent in January. 

Omnibus appropriations bill

The six-month continuing resolution put the government on autopilot until March. If replacing the sequester involves discretionary cuts, there would be momentum to replace the continuing resolution with 12 detailed bills.

Postal reform

The beleaguered U.S. Postal Service this fall defaulted on $11 billion in retiree healthcare payments. The Senate and House have different approaches to revamping the USPS. 

Payroll tax cut extension

House Democrats, led by Budget Committee ranking member Chris Van Hollen (Md.), have suggested continuing the 2-percentage-point reduction in the payroll tax that was extended in February. Some liberals are suggesting that reviving the 2009 stimulus’s Making Work Pay tax credit is a better idea. 

Unemployment insurance extension

Under an agreement forged in February, extended federal benefits have been gradually curtailed and are set to expire for the long-term unemployed at year’s end. Expect the battle to, once again, be contentious, with some lawmakers reluctant to spend federal dollars despite a national employment rate that recently rose to 7.9 percent. 

Tax extenders

A package dealing with most of 73 targeted tax credits has passed the Senate Finance Committee. The $205 billion bill would patch the AMT and contains items like the research and development tax credit and a production tax credit for wind projects. 

Infrastructure bank

Sandy has exposed weaknesses in transportation and water infrastructure and could boost plans to fix crumbling roads, bridges, ports and tunnels. Obama incorporated a bipartisan proposal to create a national infrastructure bank in his stalled 2011 Jobs Act. It would take $10 billion in government seed money to identify worthy projects and seek out private financing to supplement government loan guarantees. 

Defense authorization

A defense authorization bill has passed for each of the last 50 years, and the Senate is unlikely to break that streak in the lame duck. The main issues have been Senate floor time and Majority Leader Harry Reid’s (D-Nev.) desire to avoid giving the GOP a chance to blame Obama for sequestration. The Senate Armed Services Committee passed a $631.4 billion bill with $4 billion less in funding than the House-passed bill. The House measure seeks to ban gay marriage on military bases. 

Farm bill

The Senate has passed a bill, but House GOP leaders have refused to act on a pending plan in the lower chamber. Liberals are opposed to food-stamp cuts in both bills, while conservatives want deeper cuts. The farm bill could get wrapped into a fiscal cliff deal replacing the sequester. 

Airline emissions

The European Union has enacted a climate-change plan whereby airlines servicing the continent will have to buy carbon credits. The Senate on Sept. 22 passed a bill aimed at shielding U.S. airlines from paying greenhouse-gas penalties. The House passed a similar version of the bill in 2011 and might be amenable to passing the Senate version. 

Online poker

Reid wants action in the lame duck on a bill legalizing online poker and online lottery sales. Companion legislation has been introduced in the House by Rep. Joe Barton (R-Texas). 

Foreign Intelligence Surveillance Act

The Senate might consider the controversial FISA amendments bill in the lame duck. The legislation would reauthorize spying on foreign communications without a judicial warrant. The House has approved a five-year extension of the authority, which expires in January. 

Violence Against Women Act

VAWA became a major campaign-season talking point for Democrats, who claimed the GOP was waging a “war on women.” The House and Senate have passed different VAWA legislation, which seeks to extend funding to investigate and prosecute domestic violence. 

Permanent Normal Trade Relations (PNTR) for Russia

Russia joined the World Trade Organization (WTO) this summer with the backing of the United States. At this point, U.S. exporters cannot enjoy the lower tariffs Russia is granting other WTO members because the U.S. has not permanently removed longstanding conditions on trade with Russia stemming from the Soviet era. PNTR is heavily supported by the business community.

Benefits for same-sex partners of federal workers

Retiring Sen. Joe Lieberman (I-Conn.) has pushed a bill that would provide retirement and health benefits to same-sex domestic partners of federal workers. Sen.-elect Tammy Baldwin (D-Wis.) sponsored the House version. 

Online sales tax

Retail groups have been pushing hard for an online sales tax measure they say will level the playing field between brick-and-mortar stores and online retailers. Similar, but not identical, bipartisan measures in both the House and Senate would allow states to collect from out-of-state retailers. Some conservatives, such as Sen. Jim DeMint (R-S.C.), oppose it.

Cybersecurity

Senate Republicans blocked the Cybersecurity Act of 2012, sponsored by Sens. Lieberman and Susan Collins (R-Maine), in September, and a compromise has been elusive, given business opposition.

China currency

China currency played a big role in the presidential campaign, with Mitt Romney vowing to name China a currency manipulator on day one of his administration. The Senate passed a bill 63-35 last year hitting China with tariffs, but it has not been taken up by House GOP leaders. 

Mortgage Forgiveness Debt Relief extension

Under permanent tax law, mortgage debt that is forgiven by a bank, either through a principal reduction or a short sale, is taxed as income. But the Mortgage Forgiveness Debt Relief Act, passed in 2007 in an effort to boost the ailing housing market, allowed taxpayers to exempt that forgiveness from their tax bill. Now the law is set to expire, and industry groups and housing advocates are pushing to get it extended as part of any broad legislative package. 

Consumer Financial Protection Bureau fix

Obama’s win means that repealing Dodd-Frank is off the table. But the financial industry and both parties want to tweak part of the Wall Street reform law, which created the CFPB, that contains a technical oversight that could endanger vital information handed to the new regulator. 

— Bernie Becker and Peter Schroeder contributed.

— Updated at 8:17 p.m.