Capitol Comments

Lame Duck Congress Adjourns

By Peter Mayberry and Jessica Franken | January 3, 2007

lawmakers confirm FDA chief and pass a package of tax and trade measures

Despite many predictions that the so-called "lame-duck" session of the U.S. Congress would not produce much legislation, U.S. lawmakers managed to tie up loose ends on several unresolved policy matters during the last few days of the 109th Congress, including some issues of interest to members of INDA, Association of the Nonwoven Fabrics Industry.
Indeed, after more than nine months of operating without a permanent senior manager, the U.S. Senate voted 80 to 11 to confirm President Bush's nomination of Andrew von Eschenbach to head up the U.S. Food and Drug Administration (FDA) on December 7. Then, in the waning hours of the legislative session on December 9, the Senate approved a sweeping omnibus package of tax and trade measures that includes language restoring the research and development tax credit, extends permanently normalized trade relations to Vietnam and more.
This article will look at these late-breaking developments from late last year and consider the potential impact they may have on the nonwoven fabrics industry.

New FDA Commissioner

With a $1.9 billion budget and more than 10,000 employees, FDA plays a role in the lives of virtually every American and has regulatory responsibility for more than $1 trillion in food, pharmaceuticals, medical devices and other products making up about a quarter of the U.S. economy. For INDA members, the agency has authority over a wide range of products that incorporate nonwovens including things such as bandages, surgical drapes and gowns, tampons, wound dressings and food contact items.
Dr. von Eschenbach has served as the FDA's Acting Commissioner since the resignation of former commissioner Lester Crawford in September 2005. A urological surgeon and former director of the National Cancer Institute, Dr. von Eschenbach brings a long list of credentials to the job. He has authored more than 200 chapters, journal articles and books and has a long history of personal and professional contributions to the field of cancer research. His reputation and professional background have earned him broad praise from medical groups and endorsements from lawmakers on both sides of the aisle including Sen. Edward Kennedy (D-MA) and former Senate Majority Leader Bill Frist (R-TN) who are rarely in agreement.
Yet despite his solid reputation, his time as the Acting Commissioner has not been without challenges. Dr. von Eschenbach's formal approval was held up in Congress for nine months due to holds placed on his nomination by no fewer than five different Senators concerned about FDA's position on controversial matters such as over-the-counter sales of emergency contraception, drug re-importation and more. More recently, in fact, Dr. von Eschenbach's confirmation had been bogged down by two remaining holds placed by Senators Charles Grassley (R-IA) and David Vitter (D-LA). Ultimately, in one of his last acts as a U.S. Senator, Bill Frist took the somewhat unusual step of invoking a procedural device known as cloture to override these holds and allow for the December 7 vote approving Dr. von Eschenbach's confirmation.
Whether they supported Dr. von Eschenbach's confirmation or not, most observers seem to agree that FDA—which has been without a permanent commissioner for all but 18 months of since President Bush was first elected—has suffered from its void in leadership. As Sen. Kennedy recently stated, many hope that Dr. von Eschenbach's confirmation will "…help restore leadership to this essential agency, and begin the process of addressing many major concerns that have gone unmet for so long."
But even with the confirmation process out of the way, FDA's path forward is still a bit of a question mark. Although the agency has cited strengthening pandemic flu preparedness, protecting the food supply from bioterrorism and reauthorizing existing prescription drug and medical device user fee programs among its key 2007 objectives, the incoming Democratically-controlled Congress might have other ideas. Indeed, key House and Senate Democrats have already indicated an interest in re-opening issues such Canadian drug re-importation and tackling matters such as drug advertising and tactics used to delay market entry of generic drugs. But whatever priorities the agency ultimately embraces, most seem to agree that forward movement is still better than the holding pattern seen over the last several months.

Omnibus Tax and Trade Bill

Perhaps even more significant than Dr. von Eschenbach's confirmation was the eleventh hour passage of an omnibus package of business-friendly tax extenders, international trade measures and more found in H.R. 6111.
One of the more noteworthy provisions in the bill is language restoring and strengthening the so-called research and development (R&D) tax credit, which allows qualifying companies to deduct or subtract from corporate income taxes an amount equal to 20% of qualified research expenses above a base amount and is seen as vital to enhancing U.S. innovation and economic competitiveness.
Even though the R&D tax credit had been successfully renewed 11 times since it was first implemented in 1981, it was allowed to expire at the end of 2005, which, according to the National Association of Manufacturers (NAM), dramatically increased the cost of R&D for more than 16,000 companies that had come to rely on the credit. The measure passed on December 9 reinstates the R&D tax credit through 2007 and goes a step further by including a new "Alternative Simplified Credit" that does not use gross receipts as a factor when determining eligibility for the credit.
The bill includes a number of other measures that are seen as beneficial to the business community including enhanced tax deductions for corporate donations of scientific and computer equipment to schools, employment credits for hiring low-income workers, and more. It also renews a variety of expiring energy tax provisions including a tax credit for electricity produced from renewable resources, a deduction for energy efficient commercial buildings and a credit for business installation of alternative energy equipment.
The omnibus bill also includes a comprehensive package of international trade measures including language that: 1) renews several expiring trade preference programs and 2) allows U.S. manufacturing firms to temporarily suspend or reduce duties on inputs and products not made domestically; and 3) provides new benefits to Haitian apparel products. In addition, the bill also extends permanent normalized trade relations (PNTR) to Vietnam, which means the U.S. will be able to take advantage of market access concessions when the Southeast Asian country joins the World Trade Organization (WTO) in January 2007. For its part, INDA joined a broad array of other companies and industry groups in early December in signing on to a U.S. Chamber of Commerce letter indicating support for the trade provisions.
The omnibus measure also includes language that makes changes to health savings accounts, extends a variety of individual tax deductions and authorizes oil exploration in the Gulf of Mexico. Taken together with the tax and trade provisions, NAM president John Engler recently noted, H.R. 6111 is "good for business and consumers…increases our economic security and strengthens our competitiveness in the global marketplace" and will help "level the playing field for manufacturers."

Looking Ahead

So now that the 109th Congress has adjourned, and Democrats control both the House of Representatives and the Senate for the first time in 12 years, 2007 promises to be a very interesting year indeed. And while it is currently uncertain whether the new leadership will push an activist agenda, one thing that is broadly expected is a renewed focus on domestic issues, programs. Many observers predict that "pocket book" issues such as an increase in the national minimum wage, employee protection, as well as pension and healthcare reforms will be on the agenda over the next two years. Others point to potential interest in energy and immigration policy reforms, and new restrictions on Congressional spending for home district projects, otherwise known as earmarks.
But no matter what happens, one thing that is clear is that INDA will have lots of new members to visit with in our ongoing Congressional outreach efforts. For nearly three years now, INDA members and staff have been involved in a concerted effort to introduce our industry to as many Members of Congress as possible and, to date, we have met with representatives from more than 250 offices. So for 2007 it looks like we will have at least 50 new offices to educate!             

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