Peyser Associates has obtained very reliable information on the contents of the highway and transit program reauthorization bill which the Department of Transportation has submitted to the Office of Management and Budget for review. While the information we have obtained is subject to change by OMB, we believe the bill the Administration ultimately submits to Congress will be either identical or very close to what we share with you here on the analysis side.

Final numbers on the differing budget packages in the Senate and the House are far from concrete, with work expected through Thursday, but as they take shape some differences are emerging. Both the House and the Senate Budget Committees would move $726 billion (out of a total of $1.31-$1.35 trillion worth of tax cuts) of President Bush's new tax cut packages into reconciliation instructions, which would prevent filibusters from affecting them in the Senate. The cuts not included in the instructions could still be subject to filibuster. The House version cuts mandatory spending programs by $470 billion over 10 years, while the Senate version aims to reach a balanced budget by 2013, the final year mentioned in the plan.

The moderate movement in the Senate to reduce the overall package by half appears to have lost a little momentum as "sticker shock" from the overall deficit projection last week, coupled with the costs of a possible war with Iraq have begun to weigh heavily in some lawmaker's minds. The administration hasn't currently projected the costs of a war, and with such a large figure still unknown, several Senators have backed away from a tax cut package of any size until the numbers are disclosed.

There's sure to be plenty of resistance on both sides of the Capitol to the spending cuts and projected deficits contained within both budget blueprints, but we'll be sure to keep our friends and clients updated as progress is made throughout the week.

House Transportation and Infrastructure Committee Chairman Don Young (R-Alaska) has raised the gax tax likely to be included in the upcoming surface transporation bill up to 30.4¢ per gallon, a 12¢ increase over the current gas tax over the next six years. This is a significant increase over the 8¢ over six years increase floated last week. In addition, Young is considering a freight container fee, an idea dropped in 2002. Both ideas would generate opposition, both from the administration (which opposes any gas tax increase) and from the shipping industry (which opposes the freight container fee). With the Federal Highway Trust Fund receipts significantly lower because of the recession, any new bill will seek to increase the amount of money coming into the fund.

Senator John Breaux (D-Louisiana) said today that he believes that he has the support in principle of four Republican senators for a letter drafted by members of the bipartisan Centrist Coalition that proposes scaling back President Bush's tax cut plan. The centrists have put forth a plan that will propose a tax cut of $350 billion which is significantly less than the $726 billion tax package that President Bush has proposed.

Senator Breaux has said that he believed that the letter would likely be supported by Republicans Olympia Snow of Maine, George Voinovich of Ohio, John McCain of Arizona and Lincoln Chafee of Rhode Island.

If these four Republicans are on-board, the centrist compromise would have at least 52 votes which is enough to win a floor vote to cut the size of the President's package. A letter will be transmitted to GOP leaders after the Senate Budget Committee completes work on a budget resolution.

A group of moderates and deficit hawks from both sides of the aisle are attempting to reduce the scale of the administration's proposed tax cut package. The House and Senate markup sessions are expected to be completed by Thursday evening of this week, so the centrist Senators will have to reach consensus on a final number for their budget goal before the resolution heads for the floor. They're currently aiming around the $350 billion mark, almost half of the 726 billion dollar cut the administration is seeking, which would bring the total tax cut up to $1.6 trillion. Despite the new CBO numbers out late last week, the real question about a stimulus package of any size now seems to be "how much?"

Congressional Budget Office analysts are projecting that President Bush's budget will produce a $1.82 trillion shortfall over 10 years. These numbers indicate that there will be continual federal deficits over the upcoming decade. More details available here.

The Department of Labor is reporting that the numbers of workers on U.S. payrolls plunged in February at the sharpest rate since November of 2001. Payroll jobs outside the farm sector declined by more than 300,000 last month. Before the report came out, many had predicted that the number of jobs might actually increase by a few thousand.

The jobless rate climbed one-tenth of percentage point from January's 5.7% to 5.8% this month, with an equal distribution across most industries. Losses in the retail sector were especially deep.

The Labor Department believes that special features such as huge winter storms on the East Coast may have impacted the numbers. The report comes at a time when Americans are concerned about the health of the economy and the looming threat of war.

The Republican leadership has indicated that they are cool to the House Transportation and Infrastucture Committee vote endorsing a plan to increase mass transit and highway spending next year, which likely would be funded by a hike in the gas tax. All but one member supported the vote.

The FY 2004 spending request presented by Chairman Don Young (R-Alaska), requested $50 billion in spending for highways and mass transit programs. This amount would exceed President Bush's proposal of $36.5 billion for FY 2004.

With gas prices looming in the $2 dollar per gallon range, Republican leadership called it "political insanity" to consider increasing the gas tax.

Representative Young told the Budget Committee that the plan is in the best interest of the nation. His proposal stems from Transportation Department estimates that it will take $53 billion to maintain current conditions of road and transit systems. Transportation has indicated that the figure is actually closer to $75 billion if improvements are made.

House Republican leaders pulled a military benefits bill from the House floor yesterday after fellow Republicans expressed objections to a number of tax breaks that the House Ways and Means Committee had inserted.

Originally, the bill was designed to offer tax breaks to military personnel, including reservists called to active duty. However, as is custom, over a period of time the tax bill became more and more loaded with special interest perks.

House Ways and Means Committee Chairman, Bill Thomas (R-California) had told members they could use the tax bill as a vehicle to add other tax provisions that had failed in previous efforts. Members responded with several targeted tax breaks, including a repeal of the excise tax on fishing tackle boxes, and elimination of taxes on foreignors who bet on U.S. horse races. Another amendment ensured that foreign bow and arrow producers would have to pay the same taxes as their domestic competitors. The tax breaks totaled nearly $500 million. Many of these issues had been languishing on Capitol Hill for years, causing some members to complain that the bill was becoming a "Christmas Tree" loaded with special provisions. As the media spotlight increased, many members began to criticize the package, resulting in its demise.

The House leadership has sent the bill back to the Ways and Means Committee with instructions to fashion a bill that can pass the House floor.

On March 6, the House Transportation & Infrastructure Committee Subcommittee on Railroads heard from a panel of witnesses who drove home the point that more Federal investment in rail infrastructure -- both freight and passenger -- is needed. The stated purpose of the hearing, called by subcommittee Chairman Jack Quinn (R-New York), was to review the implementation of the rail programs which were included in TEA-21. It was not a hearing to consider new rail investment programs.

Testifiers included the following: Joseph Boardman, Commissioner of the New York State DOT, Leo McCann, Chairman of the rail-labor division of the AFL-CIO, Richard Timmons, President of the American Short Line Regional Rail Association, Ed Emmitt, President and CEO of the National Industrial Transportation League and Ed Hamberger, President of the Association of American Railroads. This hearing followed the Railroads and Aviation joint subcommittee hearing last week on intermodal transportation.

Chairman Quinn started the hearing by acknowledging that rail infrastructure programs from TEA-21 have not been very effective and that reform would be necessary. Rep. Lipinski (D-Illinios) added that slow freight trains resulting from poor infrastructure leads to economic losses. Ranking member Corrine Brown (D-Florida) also expressed concern over the lack of federal funding of rail infrastructure.

Joseph Boardman provided the committee with a comprehensive power-point presentation on travel congestion in the Northeast. Boardman predicted that truck travel will increase exponentially over the next 20 years, further exacerbating traffic congestion. In the Northeast, there is a truck-rail imbalance, which increases the costs of conducting business in the region, said Boardman. The New York DOT Commissioner said the Northeast economy depends on a reliable rail infrastructure system and stressed how rail corridors will remove the heavy burden placed on highways.

Leo McCann, who represents rail labor, expressed concern that freight rail infrastructure improvements have been deferred because of profit concerns. McCann said maintenance on rail infrastructure could no longer be delayed and requested that the federal government play a more prominent role in providing financial assistance. McCann also briefly mentioned Amtrak and urged Congress to fully fund Amtrak at the levels they requested. Jack Quinn added, "Congress had always given Amtrak enough money to fail". However, Quinn also said the fact that the Administration has suggested a funding level of $900 million for Amtrak in fiscal '04 (60% more than they requested for fiscal 2003) was a hopeful sign.

Ed Hamberger echoed the sentiments of his fellow panelists and added that government should create more tax incentives for freight railroads to invest in infrastructure. Hamberger rejected the notion that a rail trust fund was necessary. Ed Emmitt even proposed repealing the 4.3 cents per gallon that freight rail operators already pay on fuel, claiming that the tax does not benefit rail, unlike other modes of transportation.

In summary. the panelists were in agreement that the federal government must devote greater resources to enhancing rail infrastructure.

We've got the new TEA-3 questionnaire posted on the analysis portion of the website. Project funding proposals need to be submitted by April 2, so if you have any questions feel free to contact us.

The vote to force cloture on the Miguel Estrada nomination failed today. In order to end debate, Senate Majority Leader Bill Frist (R-Tennessee) needed to collect 60 votes, but only 55 senators supported the resolution, with 44 opposing it. Frist promised to continue to ask for cloture votes on the topic in order to keep pressure on Democrats, but for now it's back to business as usual in the Senate.

The Senate Committee on Appropriations on March 4 followed the lead of the House of Representatives and re-aligned its subcommittees. Like the House, they established a new Subcommittee on Homeland Security, abolished the Subcommittee on Treasury-Postal and moved most of its repsonsibility to the Subcommittee on Transportation (now Transportation-Treasury).

Chairing the new Homeland Security panel will be Sen. Thad Cochran (R-Mississippi). The Ranking Minority Member will be Sen. Robert C. Byrd (D-WV). On the list of Chairs and Ranking Members, the only other changes from the previous composition is Sen. Robert Bennett (R-Utah) as Chairman of the Agriculture Subcommittee and Sen. Byron Dorgan (D-North Dakota) as Ranking Minority Member on the Interior Subcommittee.

Please see the list below for the composition of all the subcommittees of the Senate Committee on Appropriations.

Agriculture (8-7)

• Republican Members: Senators Bennett (Chairman), Cochran, Specter, Bond, McConnell, Burns, Craig, and Brownback
• Democratic Members: Senators Kohl (Ranking), Harkin, Dorgan, Feinstein, Durbin, Johnson, Landrieu

Commerce/Justice/State (7-6)

• Republican Members: Senators Gregg (Chairman), Stevens, Domenici, McConnell, Hutchison, Campbell, and Brownback
• Democratic Members: Senators Hollings (Ranking), Inouye, Mikulski, Leahy, Kohl, Murray

Defense (10-9)

• Republican Members: Senators Stevens (chair), Cochran, Specter, Domenici, Bond, McConnell, Shelby, Gregg, Hutchison, and Burns
• Democratic Members: Senators Inouye (Ranking), Hollings, Byrd, Leahy, Harkin, Dorgan, Durbin, Reid, and Feinstein

District of Columbia (3-2)

• Republican Members: Senators DeWine (Chairman), Hutchison, and Brownback
• Democratic Members: Senators Landrieu (Ranking) and Durbin

Energy and Water (7-6)

• Republican Members: Senators Domenici (Chairman), Cochran, McConnell, Bennett, Burns, Craig, and Bond
• Democratic Members: Senators Reid (Ranking), Byrd, Hollings, Murray, Dorgan, and Feinstein

Foreign Operations (8-7)

• Republican Members: Senators McConnell (Chairman), Specter, Gregg, Shelby, Bennett, Campbell, Bond, and DeWine
• Democratic Members: Senators Leahy (Ranking), Inouye, Harkin, Mikulski, Durbin, Johnson, and Landrieu

Homeland Security (9-8)

• Republican Members: Senators Cochran (Chairman), Stevens, Specter, Domenici, McConnell, Shelby, Gregg, Campbell, and Craig
• Democratic Members: Senators Byrd (Ranking), Inouye, Hollings, Leahy, Harkin, Mikulski, Kohl, and Murray

Interior (8-7)

• Republican Members: Senators Burns (Chair), Stevens, Cochran, Domenici, Bennett, Gregg, Campbell, and Brownback
• Democratic Members: Senators Dorgan (Ranking), Byrd, Leahy, Hollings, Reid, Feinstein, and Mikulski

Labor/HHS/Education (8-7)

• Republican Members: Senators Specter (Chairman), Cochran, Gregg, Hutchison, Craig, Stevens, DeWine, and Shelby
• Democratic Members: Senators Harkin (Ranking), Hollings, Inouye, Reid, Kohl, Murray, and Landrieu

Legislative Branch (3-2)

• Republican Members: Senators Campbell (Chairman), Bennett, and Stevens
• Democratic Members: Senators Durbin (Ranking) and Johnson

Military Construction (5-4)

• Republican Members: Senators Hutchison (Chairman), Burns, Craig, DeWine, and Brownback
• Democratic Members: Senators Feinstein (Ranking), Inouye, Johnson, and Landrieu

Transportation/Treasury (8-7)

• Republican Members: Senators Shelby (Chairman), Specter, Bond, Bennett, Campbell, Hutchison, DeWine, and Brownback
• Democratic Members: Senators Murray (Ranking), Byrd, Mikulski, Reid, Kohl, Durbin, and Dorgan

VA/HUD (7-6)

• Republican Members: Senators Bond (Chairman), Burns, Shelby, Craig, Domenici, DeWine, and Hutchison
• Democratic Members: Senators Mikulski (Ranking), Leahy, Harkin, Byrd, Johnson, and Reid

Over on the analysis side of the website, we've posted a new article covering Homeland Security funding for Fiscal Year 2004. The administration proposal doesn't use entirely new money, so it's important to go through the chart to see which programs have been cut and which have seen an increase in funds.

On March 5, the House Judiciary Committee passed 'The H.E.A.L.T.H Act' (HR 5), by a straight party line 15-13 vote. The bill, introduced by Rep. James Greenwood (R-Pennsylvania) of the House Committee on Energy and Commerce, would implement caps on non-economic and punitive damages sought in medical malpractice suits. The bill would also restrict contingent fees for attorneys representing plaintiffs in medical liability cases.

On March 6, the House Committee on Energy and Commerce will mark up the portions of the bill under its jurisdiction. Floor action could occur as early as the week of March 10.

The committee debated the measure for nearly 6 hours and Democrats on the committee introduced 8 amendments, which all failed on party line votes. Democrats are generally opposed to imposing caps on non-economic damages. House Judiciary Ranking Member John Conyers (D-Michigan) stated, "there is no correlation between caps on non-economic damages and rising insurance programs" and argued rising insurance premiums are related to a decreasing investment income.

Democrats also contended that each state should have the right to set their own caps on non-economic damages. Rep. Melvin Watt (D-North Carolina) felt that HR 5 would supersede state law and infringe upon states rights. Watt introduced an amendment that would have applied caps on non-economic damages only to cases in federal court.

Democrats also introduced amendments that would index the cap on non-economic damages, raise the cap to $1.6 million, repeal the 'fair share rule' (entities may only pay damages in proportion to their liability for the injury), and require the public disclosure of all doctors who were forced to pay damages in excess of $10,000.

Republicans were unified in their opposition to these amendments, with only a few defections on some of them.

We will have more information on this legislation as events occur.

Congressional Republicans have indicated that they plan to split up the President's economic plan. Republicans are seeking to make President Bush's proposed tax cut/stimulus package filibuster-proof in the Senate, but will not do the same for his proposal to make permanent the large tax cut enacted in 2001. Therefore those cuts in income tax rates, taxes paid by families with children and other reductions will otherwise expire after 2010.

The decision to protect the economic plan from filibuster means they need only 51 votes in the 100-member Senate to prevail. The part of Bush's tax cuts not protected from filibuster would need 60 votes to overcome Democratic procedural delays. The Republicans have a 51-48 majority in the Senate with one Independent.

This decision by the Republicans may indicate a concern that they might lack the votes for Senate passage of Bush's entire tax cut package. The plan is opposed by nearly every Democrat and has been received cautiously by some of the moderate Republicans. Since the plan's unveiling, administration officials have focused primarily on the economic growth portion which would erase the corporate dividend tax and accelerate personal income tax rate reductions enacted in 2001 that have yet to take effect.

At the House Ways and Means Committee's first hearing Tuesday on the President's tax plans, Democrats challenged the Administration's proposals. Concerns were raised as to why Congress should pursue the possibility of tax cuts when a potentially costly war with Iraq may be about to begin.

House and Senate committees are planning to begin writing budgets next week covering the next 10 years. Both are hoping to develop plans that would be balanced at the end of that period.

Here in the District, the D.C. Council has unanimously elected to speed up next year's presidential primary to January 13th, ahead of every state. They did so in order to focus attention on the city's lack of voting representation in Congress although party leaders of both parties have opposed the decision, saying they'll withold delegates if DC goes ahead as planned. Prominent district politicians from both sides, including Mayor Anthony Williams (D) and Council Member Carol Schwarz (R-At Large), have expressed support for the move which must, like all bills introduced by the city government, be approved by Congress. One of the reasons supporters drafted the bill was to highlight the very process by which it must be approved. The District's primary is normally held in May.

Senator Majority Leader Bill Frist (R-Tennessee) has decided to seek a cloture vote on the nomination of Miguel Estrada. Although the vote is expected to fail, Frist expressed that he would continue to push for cloture votes to press the Democrats on the nomination issue. A loss on the cloture vote would allow Senate business to continue although it would set a precedent for a 60-vote majority for future judge confirmations, something that House Majoirty Whip Mitch McConnell (R-Kentucky) and Conference Chairman Rick Santorum (R-Pennsylvania) had sought to avoid though the use of the no-cloture tactics. With upcoming Senate business on arms control and abortion, a cloture vote will allow the Senate to continue to function normally.

Today, before a joint session of the Pennsylvania Legislature today, Governor Edward G. Rendell unveiled a $21 billion budget that requires spending cuts, but balances a $2.4 billion budget deficit for the fiscal year 2003-2004.

To eliminate an estimated $2.4 billion shortfall in 2003-2004, the budget calls for cuts in spending from virtually every area of the state budget. The budget, released today, however, includes more than $750 million in increased revenues for fiscal year 2003-2004. Included is the assessment of the balance of the Tobacco Settlement Fund Endowment Account and the use of the balance of the Rainy Day Fund

These cuts, however, will be balanced by an investment program which will be designed to stimulate the state's economy while placing a down payment on the Governor's key campaign promises of property tax releif and reformed education funding. The new plan which will be revealed when he returns for a second joint session of the legislature on March 25, 2003 is entitled, "The Governor's Plan for a New Pennsylvania."

The White House has released an outline for overhauling Medicare which focuses on giving seniors the option of choosing from a selection of private plans or staying in the current fee-for-service plan. The new framework offers limited prescription drug coverage in the traditional Medicare coverage, however the more extensive drug options would be provided through private insurers. This plan offers more generalities than details and has left the specifics up to Congress.

The President's plan calls for a drug discount card with a cap on out-of-pocket costs for senior who want to stay in the traditional Medicare program. Seniors whose incomes place them below the federal poverty line would be given an additional subsidy of $600 a year to help pay for their medicine. Seniors will be encouraged to leave the Medicare fee-for-service plan because they would get more generous prescription drug benefits under private plans.

The Administration's plan would offer seniors Medicare coverage in the following ways:

• Seniors remaining in the current fee-for-service plan would be offered a drug discount card beginning in 2004. Seniors would also receive coverage for their drug costs over a certain threshold.
• To gain drug coverage and coverage of preventive services seniors could obtain a new version of the Medicare managed-care program known as Medicare + Choice. Through the program, renamed "Medicare Advantage," the government would offere subsidies for providing drug benefits to an array of private managed care plans. This program would begin in 2006.
• New private insurance plans would allow seniors to choose from a wide private network of doctors. Seniors would pay a single deductible for physicians' visits and hospital care.

House Democrats plan to offer a proposal that offers full coverage for prescription drugs. Under their proposal, seniors would pay a $25 montly premium and a $100 deductible. Seniors also would have a 20 percent copayment, and the government would be responsible for the remaining costs. Once beneficiaries had $2,000 in out-of-pocket expenses for prescriptions, Medicare would pay for any additional drug costs.

The Democratic proposal is expected to cost about $900 billion over ten years. Senate Democrats' plan would cap out-of-pocket expenses at about $3,700 a year; its costs would top $600 billion over a decade. Bush proposes to boost spending by $400 billion over 10 years.

This two-pronged approach by the Administration is different than the Medicare plan offered earlier this year that would have required Medicare patients to join a managed-care plan to receive drug coverage. This plan was never announced but lawmakers panned it after details circulated in the health care community.

The President's new plan was received more warmly by Finance Committee Chairman Charles Grassley (R-Iowa), and Rep. Billy Tauzin (R-LA), chairman of the House Energy and Commerce Committee. However, Democrats, on the other hand, denounced the plan as being too meager for the traditional Medicare patients and claim the plan is turning an entitlement into a voucher plan.

This week, two House Committees will be considering legislation introduced by Rep. James Greenwood (R-PA) intended to place a cap on non-economic damages in medical malpractice suits. The HEALTH Act (HR 5) would implement a $250,000 limit on both punitive damages and pain and suffering damages sought by plaintiffs in medical liability lawsuits. Currently, there exists no federal law that limits jury awards in medical malpractice cases, but some states like California do have laws that limit non-economic damages.

Greenwood's bill has 108 cosponsors in the House, but support in the Senate is tenuous. Just last year, medical malpractice reform failed to pass the Senate, with ardent opposition from numerous advocacy groups including the American Trial Lawyers Association (ATLA). This year, groups that represent doctors and hospitals, including the American Medical Association (AMA), have assiduously pushed for medical liability reform. In some states like New Jersey and Pennsylvania, doctors and hospitals have called for malpractice reform to mitigate the rising malpractice insurance rates, which has drove many doctors to either strike or move their practice. The AMA feels that excessive jury awards have precipitated the rise in insurance rates for doctors, especially specialists in high-risk fields. The ATLA feels that insurance companies are mostly to blame for the current crisis. As a result of the slowed economy and lower stock prices, the ATLA has argued that insurance companies have raised insurance fees to recoup losses in the stock market.

The bill would also limit the amount of money that lawyers could collect if plaintiffs received non-economic damages.

On March 5, the House Judiciary Committee will mark up HR 5 and the House Energy and Commerce Committee will mark up part of the measure the following day. The bill could reach the House floor by next week.

The U.S. Conference of Mayors met today to discuss issues of importance to cities across the nation. Some highlighted points from the meeting:

Homeland Security

• Senate Minority Leader Tom Daschle (D-South Dakota) and House Minority Leader Nancy Pelosi (D-California) went on record and supported direct First Responder funding to localities
• Conference of Mayors urged Congress to provide First Responder funding in a Supplemental Appropriations Bill
• Susan Collins (R-Maine) proposed that cities need direct funding for Homeland Security
• The National League of Cities and other "Big 7" organizations still support First Responder funds being distributed to cities via states

Transportation

• Mayors outlined three principles that should guide TEA 21 reauthorization
  1. Increased funding
  2. Sub-allocation
  3. Congestion mitigation
• Conference of Mayors concerned about maintaining significant levels of funding for transit programs in TEA 3
• House Subcommittee Chairman Jack Quinn (R-NY) will likely hold hearing on the future of Amtrak in late March
• Conference of Mayors does not believe that Congress will pass both Amtrak reauthorization legislation and TEA 3 in the same year - despite claims by Hill staffers that Congress will accomplish both tasks by the end of the year

Today, Senator Dodd decided to forego entering the already crowded Democratic presidential primary race, saying he'd rather focus on his work in the Senate. With Dodd's withdrawal, the only three remaining people whose names are still being tossed around for a possible run are Senator Joe Biden of Delaware, former NATO Supreme Commander Wesley Clark and former Senator Gary Hart. With fundraising time quickly evaporating, any additional candidates will have to make their decisions within a shortened timeframe, in order to avoid the catch-22 stigma of appearing too late to be elected, which reduces a donor's willingness to contribute, which exacerbates the original problem.

Senator Bob Graham from Florida has officially filed papers to form an exploratory presidential campaign. The Floridian is a former two-term governor and has won five statewide victories in this key battleground state. He has also served in the leadership of his party's senatorial campaign committee.

He has served as chairman of the Senate intelligence committee and spent last year warning the nation that the Bush administration is not doing enough to protect homeland from terrorist attacks.

Senator Graham is the ninth Democrat to get in the race. While it is widely viewed that he is getting in the race too late for financial and organizational reasons, his entry does complicate the lives of many Democrats already in the race. He eliminates Senator John Edwards of being the only southerner in the race. His vote against the resolution authorizing war in Iraq will eliminate former Governor Howard Dean as the only candidate with executive experience who is against the war in Iraq. Being a Floridian will also cut into Senator Joe Lieberman's popularity in the state.

Senator Graham is from a wealthy landowning family in Florida. He waited to get into the race to recover from major heart surgery performed in January.