NEWS FOCUS
After working late into the night on Dec. 20, Congress decided to take a month-long mid-term vacation. So the second and final session of the 99th Congress won't convene until Jan. 21. As in every session of Congress that is a continuation of a previous one, a lot of unfinished business remains—a major tax bill, a final decision on how to carry out and finance hazardous waste site cleanups, changes in the clean air and water laws, what to do about trade problems. But in one very important way, this session will be different from any previous session. Every action that Congress takes this year, every decision that it makes will be affected by a law that at the beginning of this Congress everyone said was needed but nobody expected to be enacted. December 1985 will go down in history as the time Congress finally decided to do something about the soaring budget deficit by legislating a balanced budget within the next five fiscal years. 8
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Budget. The decision to eliminate deficits coincided with the need to raise the nation's debt limit from $1.82 trillion to an unprecedented $2.08 trillion. (The debt limit had to be raised so the federal government could borrow money to finance spending decisions it already had made.) That was too large a pill for most members of Congress to swallow. In an effort to make it slightly more palatable, three Senators—Republicans Phil Gramm of Texas and Warren B. Rudman of New Hampshire and Democrat Ernest F. Hollings of South Carolina—formulated a plan to force a balanced federal budget by fiscal 1991. It was an idea that Congress couldn't refuse, and so it became the major part of the debt limit legislation and was dubbed the "Emergency Deficit Control Act of 1985." If the deficit reduction plan survives a court challenge brought by 12 Representatives, it could result in a zero deficit by 1991. That's a long way from the nearly $212 billion federal deficit accrued in fiscal
Congressional Outlook^o Janice R. Long, Lois R. Ember, and David J. Hanson, C&EN Washington
1985, which ended last Sept. 30. The legislation mandates a gradual reduction from last year's deficit each year, limiting it to $171.9 billion in fiscal 1986, $144 billion in 1987, $108 billion in 1988, $72 billion in 1989, $36 billion in 1990, and zero in 1991. If Congress in its normal budget and appropriations legislation fails to hold the deficit to the specified amount, an automatic process is triggered that ends when the President signs an executive order making across-the-board cuts in federal spending to get the deficit down where it belongs. Half the automatic reductions are to come out of defense programs and half out of civilian programs. However, interest on the national debt, the social security program, and eight low-income assistance programs would be exempt from the automatic cuts. Reductions in several other programs would be limited to 2%. Altogether, well over 50% of the federal budget is protected from automatic cuts. That leaves nonexempt programs, including R&D, vulnerable in
future years to what could be some very large cuts. The full effect of Gramm-Rudman-Hollings' act won't be felt in fiscal 1986. No matter what the deficit, no more than $20 billion on an annual basis can be cut from the current budget. Since the reductions won't be made until March 1, they actually would amount to $11.7 billion. That might not sound like much. But as Rep. Les Aspin (D.-Wis.), chairman of the House Armed Services Committee, points out, cutting $5.85 billion from the defense budget really entails cuts in spending authority of $10 billion to $13 billion. That's because under most grants and contracts, the money, rather than being provided all at once, is spent over a period of years. The Gramm-Rudman-Hollings plan actually will start to squeeze budget planners in fiscal 1987. It's estimated that reducing the deficit to $144 billion in that year will mean cutting outlays $60 billion and spending authority at least $120 billion and perhaps as much as $180 billion. The last figure is about three times the amount the federal government spends on all its R&D programs and about half the defense budget. The automatic across-the-board cuts mandated by the Gramm-Rudman-Hollings plan may not be necessary. Congress instead may bite the bullet and decide for itself which programs should be eliminated or cut back to reach the deficit target. But if this past year was any indication, that won't happen. In a year when Congress decided to reduce the deficit to zero over five years, it couldn't even agree on a three-year $74 billion deficit reduction package that both houses January 13, 1986 C&EN
9
News Focus had passed and a House-Senate conference committee had cleared. The conference report bounced back and forth across the Capitol four times before the Senate gave up and went home for the holidays, once it saw that the House was adamantly opposed to a provision the Senate inserted in the bill imposing a broad-based tax on manufacturers to pay for the cleanup of hazardous waste sites. Drugs. A Senate bill, S. 1437, introduced by Strom Thurmond (R.-S.C), would make the so-called "designer drugs" illegal. It has passed in the Senate, but the House has yet to introduce a companion bill. Thurmond's legislation provides fines of up to $250,000 and imprisonment for up to 15 years for anyone caught making or selling any drug that is substantially similar to controlled substances such as heroin. Under current law, compounds that are similar to, but do not have the exact chemical composition of, controlled drugs are not illegal. The designer drug bill has safeguards added that will permit legitimate researchers to continue drug research at pharmaceutical companies. Once designer drug legislation is introduced in the House, it is expected to move quickly. Pharmaceutical companies may be getting a little more help next year on exports. Rep. Edward R. Madigan (R.-Ill.) introduced the Pharmaceutical Exports Amendments Act late last year. It would permit U.S. pharmaceutical manufacturers to export products that have not been approved by the Food & Drug Administration but are lawfully marketed in the importing country. The U.S. is one of the few, if not
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the only, countries that put such a strict export restriction on their own businesses. Drug companies have been lobbying for such a bill for years, arguing that the export limitation has forced companies to open facilities in other nations to manufacture useful products. The Senate Labor & Human Resources Committee already has approved a similar bill, and it is ready to be voted on by the full Senate. Energy. As with most other areas, Congressional energy committees and subcommittees are waiting to see the impact of the deficit-reduction package signed into law in 1985. The effect it will have on energy research and development could be serious. In previous years Congress has shown an inclination to strike hard at research in nuclear fission and fusion, two big items that seem to stand out. On the whole, energy issues will not be a priority item as long as oil prices remain low and natural gas supplies do not become tight. On other energy matters, more debates are expected this year concerning offshore oil and gas drilling. Most of the discussion is over the annual attempt to lift a ban on leasing of new drilling sites off the California coast. The Administration has inserted this proposal into the Interior Department's budget request for the past four years, but the proposal has not won Congressional approval. The synthetic fuels issue was resolved late last year when the last remaining funding was revoked for U.S. Synthetic Fuels Corp. Some development money for a few ongoing projects was transferred to the Energy Department. Just five years old, SFC had become a symbol—to some members of Congress—of unnecessary government spending, although many believe the long-term need to develop a synthetic fuels industry is still clear. Environment. Last year was not a stellar one for environmental legislation, and 1986 may not be much brighter. Bills to renew the Clean Water Act, the Safe Drinking Water Act, and Superfund made it out of both houses of Congress. For various reasons, however, they never made it to conference committees to iron out the differences. Still, they fared better than bills to renew the long-expired Clean Air Act, or to control industrial and automotive emissions that cause acid rain. Sen. Robert T. Stafford (R.-Vt.), who chairs the Environmental & Public Works Committee, has tried for several years to get an acid rain bill out of the Senate. Undaunted, and encouraged by new Canadian control efforts, he says heTl try again this year. He especially praises Ontario's new program to reduce acid-causing emissions 67%, a reduction that he notes will cut acidic deposition in New England 5 to 10%. Stafford says his committee will hold more hearings on the control of acid rain. And he hopes "the committee can complete action on and report acid rain control legislation to the Senate floor early in the year." On the House side, Rep. H e n r y A. Waxman (D.-Calif.), chairman of Energy & Commerce's Sub-
committee on Health & Environment, is expected to introduce acid rain legislation this month or next. It will call for a 40 to 50% reduction in sulfur dioxide emissions, and a comparable cut in emissions of nitrogen oxides in all 48 contiguous states. To make financing more palatable to western and northeastern states, the funding scheme will be built around low-interest loans for major capital expenditures. Asked about the bill's chances, a Congressional aide said, "It will be an uphill battle again this year." Waxman's committee is expected to take some action on the so-called toxic release control bill, birthed in the aftermath of the Bhopal accident. This measure to control the emissions of toxic chemicals from chemical plants is likely to remain separate from an effort to renew the Clean Air Act. Last year the toxic release control bill never made it out of committee. However, a Congressional aide says the growing evidence of the need for "an effective, program to deal with the release of toxic chemicals" may fuel action this year. "The chemical industry can't regulate itself," he adds. The Senate dealt with the issue of the release of toxic substances to various media in its Superfund bill. At press time it was not certain whether the Senate Environment Committee would develop a toxic release control bill specific to air. The legislation most likely to be enacted first this year is renewal of the Safe Drinking Water Act. A conference committee will meet to work out the differences in the Senate and House bills. A Congressional aide says both bills recognize "the absence of public health standards for toxics in drinking water, and both acknowledge the need for more aggressive action by EPA." Since 1974, EPA has set only 22 standards for the purity of potable water. To improve on that record, the Senate and House bills would force EPA to set health standards for specific numbers of toxic chemicals in drinking water. A sticking point for the conference is likely to be protection of underground sources of drinking water. The House bill requires states to submit protection plans to EPA within three years. The Senate bill does not have that provision. The Reagan Administration opposes both bills, contending that regulation of drinking water is a state responsibility. The second bill to move out of conference—by midMarch a Senate aide predicts—likely will be renewal of the Clean Water Act. The motivating force is the $2.4 billion per year in construction grants authorized by both House and Senate bills. Of particular interest to the chemical industry are provisions called fundamentally different factors variances and the antibacksliding provisions. The former were created by EPA to allow for tailored, plantspecific instead of industry-specific, effluent limitation regulations. With some differences, both bills authorize plant-specific regulations but, at the same time, greatly restrict them. The antibacksliding provisions, found in both bills in slightly different forms, would prevent an indus-
trial permit holder from meeting weaker requirements imposed by regulations issued after its permit was obtained. EPA, for example, has not yet set effluent limitation standards for the organic chemical industry. Yet, many companies have discharge permits whose conditions may turn out to be more stringent than the rules ultimately promulgated. Another set of bills—to renew Superfund—was headed for conference reconciliation shortly before Congress adjourned last year. The conference on this major piece of legislation to continue the program to clean up hazardous waste sites is expected to be contentious and long. The thorniest issue is funding for the multibilliondollar program. The Senate would finance its five-year, $7.5 billion package through an excise tax on large manufacturers—a type of value-added tax. The House would finance its five-year, $10.1 billion program with increases in the oil and chemical feedstock taxes in the law that lapsed last Sept. 31. Late last year the Superfund funding issue derailed the debt reconciliation process—a totally unrelated matter. This is an indication of just how contentious the funding issue is. January 13, 1986 C&EN
11
News Focus
As one House committee aide said, ' T h e House bill is much more demanding of EPA and allows for much less agency discretion than does the Senate bill." The House bill calls for cleanup standards and schedules, and gives citizens the right to sue in federal courts. The Senate bill has no such provisions. These differences may become significant in conference. Health. Biomedical research may get more than its expected share of attention in 1986. Some members of the Senate take a dim view of the workings of the new Biotechnology Science Coordinating Committee set up recently by the Administration to coordinate and oversee genetic engineering and recombinant DNA developments. Sen. David Durenberger (R.-Minn.) has sponsored a bill that would require a license from EPA for any release or use of a genetically engineered organism. This bill, S. 1967, amends the Toxic Substances Control Act and would give one agency—which one has not been decided—overall authority to regulate the biotechnology industry. Hearings on the bill are planned for spring. Also, a House investigation of the Biotechnology Science Coordinating Committee by Rep. John D. Dingell (D.-Mich) is expected soon. 12
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Biomedical research at the National Institutes of Health had a rough year in 1985, culminated by Congress' reauthorizing NIH through 1988 by overriding a Presidential veto. The reauthorization gives NIH funds for additional research grants and sets up a new national institute for arthritis research. Budget cutting at the Office of Management & Budget is likely to trim those additional funds again in fiscal 1987, but Congress seems confident that more research in this area is wanted. The Food & Drug Administration last year made a new interpretation of the Delaney amendment. That law prohibits any chemical that has been found to cause cancer in animals from being used as a food additive. The Delaney amendment has been invoked only a few times, and once, in the case of saccharin, was overridden by Congress. FDA's new position is that the law should apply only to chemicals that are used in food in sufficient amounts to cause cancer. If the concentration of the chemical is so low that its danger is believed to be negligible, then it may be used. Congress has been threatening to change the Delaney amendment for years, and in effect the new FDA ruling has done what Congress hasn't done. FDA's interpretation has been challenged in court, but a decision has not yet been made. With FDA already moving to change the Delaney amendment on its own, Congress might move to alter the law as well. Another health protection bill introduced late last year is designed to reduce pesticide residues on fresh fruits and vegetables. The measure, H.R. 2924, was introduced by Rep. Waxman as an amendment to the Food, Drug & Cosmetic Act, which sets tolerances for pesticides on foods. The foundation for this bill goes back to the 1983 flap over ethylene dibromide residues on fruit, and it would set emergency action limits for pesticides that pose an imminent hazard to the public health. Nuclear waste. A major hurdle in disposal of radioactive wastes was sidestepped neatly last year with the passage in December of a bill to extend the deadlines in the Low-Level Radioactive Waste Policy Act for another seven years. The law set a Jan. 1 deadline for forming radioactive waste-disposal regional compacts among states. Little progress had been made in forming those compacts, and those few states that had approved disposal sites were threatening to close them to wastes from outside their states. The new deadline for having operating disposal sites is Jan. 1, 1993, and the bill contains intermediate deadlines for facility development. Most of the radioactive material comes from nuclear power plants, but some also comes from research labs and hospitals. An important point is still not resolved, however, in this compromise deadline extension bill, originally introduced in the House as H.R. 1083. That is what to do about so-called mixed wastes—those containing both hazardous chemicals and low-level radioactive waste. Hearings are supposed to be held on this issue by the House committees on Energy & Commerce and on Interior & Insular Affairs.
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News Focus Right-to-know. Carrying over this year from issues raised by the poison gas disaster in Bhopal, India, is the problem of how to let people know what chemicals are being made or used in their neighborhoods. This community right-to-know issue became important a year ago, and a provision has been incorporated into the Superfund reauthorization bills. EPA's voluntary plan has not been well received, and Congress may well be moved to try to force companies to reveal their materials and processes if they can be considered dangerous. A tough worker right-to-know bill is in the works in the House (H.R. 1309). This legislation would strengthen requirements on informing employees about chemicals with which they are working. Such a law is not supported by the Occupational Safety & Health Administration, which has implemented a new "special emphasis" inspection program and believes that its hazard communication rule, which went into effect late last year, provides employees sufficient protection. Taxes. When Congress reconvenes, the Senate Finance Committee will move to the center of the tax reform stage. That position was held most of last year by the House Ways & Means Committee. Nobody thought its chairman, Rep. Dan Rostenkowski (D.-Ill.), could do it, but with a major assist from President Reagan, he pushed a major tax bill through the House in the closing days of the first session. At one point, the tax bill looked dead. House Republicans and a number of disaffected Democrats joined together to defeat a rule that would have allowed the bill to come up for a floor vote. However, President Reagan, in an effort to keep one of his major legislative initiatives for his second term alive, managed to sway a number of Republicans by promising to veto any bill that did not meet his or their specifications. Naturally, he hoped the Republican-controlled Senate would come up with an acceptable bill. So the next time the floor-vote rule came up, it was approved, and the bill finally passed on a voice vote; no roll call took place. Under the House bill, individual income taxes generally would be reduced. In addition, benefits that employers provide employees, such as educational assistance, would retain their current tax-free status. However, although the bill would lower corporate tax rates, its net effect would be to increase the taxes actually paid by companies. Under the bill, the current tax credit for investments in new machinery and capital equipment would be repealed, the depreciation schedule for writing off their cost would be lengthened, and a minimum 25% tax would be imposed on the most profitable corporations. Senate Finance Committee chairman Bob Packwood (R.-Ore.) plans to begin two weeks of hearings on the House tax bill around the end of this month and expects to begin marking up a Senate version of the bill in March. However, a tax bill likely won't be enacted before the middle of this year at the earliest, and the House bill contains a number of provisions that would have become effective on Jan. 1, 1986. So 14
January 13, 1986 C&EN
to ease taxpayers' apprehensions, the Senate has passed a resolution that, if and when it enacts a tax bill, the provisions will be effective on Jan. 1,1987. Rostenkowski has said that one of the first things the Ways & Means Committee will take up this year is extending, retroactive to Jan. 1, a number of tax code provisions that expired on that date. Those include the R&D tax credit, business and residential energy tax credits, the income exclusion for employer-provided education assistance, and a moratorium on enforcement of new Internal Revenue Service rules affecting allocation of company R&D expenditures between income from U.S. and foreign sources. The House approved such an extension during the closing hours of the December session, but the Senate refused to go along. Also on the table for both tax-writing committees will be an Administration proposal to prohibit states from imposing a corporate income tax on the worldwide income of multinational corporations, the socalled unitary tax. The Administration also wants to limit the ability of states to tax dividends received by U.S. companies from foreign corporations. Although it's not on a public agenda, raising more federal revenue—meaning increasing taxes—may be the real issue of the coming year. Faced with expected massive cuts in the federal budget—particularly the defense budget—mandated by the Gramm-RudmanHollings deficit reduction plan, it's thought that the President may back off from his long-standing opposition to a tax increase. Hollings, for one, already has suggested that one way to partially meet the mandates of the law he coauthored would be to freeze the tax-indexing provisions that took effect last year and to require a minimum corporate tax of 5%, along with repealing the investment tax credit. Trade. The U.S.'s soaring trade deficit, company shutdowns, and worker layoffs because of unfair foreign trade practices were all subjects of much discussion but little action in the first session of the 99th Congress. Legislation was passed that called for sharp reductions in imports of textiles from a number of countries, primarily in Asia, and imposed new trade curbs designed to aid the shoe and copper industries. However, that piece of legislation earned one of the few Presidential vetoes, and Congressional supporters decided not to attempt an override. Attention is now expected to turn from providing help to specific industries to more "generic" legislation revising U.S. trade policy and practices. In late November more than 30 Senators, including Commerce Committee chairman John C. Danforth (R.-Mo.) and majority leader Robert J. Dole (R.-Kan.), introduced a bill, S. 1860, that its sponsors say contains measures designed to ensure systematic enforcement of laws against unfair foreign-trade practices; expand trade through market-liberalizing trade agreements; and ease adjustments of import-affected industries. Early action is promised on the bill, which is similar to H.R. 3777. This bill already has been approved by the House Energy & Commerce Committee. •
