Today President Bush is expected to name former Senators Connie Mack (R-Florida) and John Breaux (D-Louisiana) to his tax overhaul commission. They are both advocates of reducing taxes on savings, something the President supports. They are being named as part of the President's new nine-member President's Panel on Federal Tax Reform.

While the commission is unlikely to opt for a drastic shirt to a national sales tax there may be changes to the tax code such as eliminating taxes on investment income.

It has also been suggested to eliminate corporate tax deduction for interest expenses and employer-provided health care. Eliminating deductions for state and local taxes may also be looked at.

Several House committees have been adjusted this week by House Speaker Dennis Hastert (R-Illinois) after consultation with Minority Leader Nancy Pelosi (D-California). Eleven panels will be changed, making this the largest alteration since 1998, when eight panels were modified. Democrats will lose seats in each change save one, The Judiciary Committee, where they will gain one. The breakdown by party follows.

• Agriculture: 25R/21D - formerly 27R/24D
• Appropriations: 27R/29D - formerly 36R/29D
• Armed Services: 34R/28D - formerly 33R/28D
• Budget: 22R/17D - formerly 24R/19D
• Government Reform: 23R/17D/1I - formerly 24R/19D/1I
• International Relations: 27R/23D - formerly 26R/23D
• Judiciary: 23R/17D - formerly 21R/16D
• Resources: 27R/22D - formerly 28R/24D
• Science: 24R/20D - formerly 25R/22D
• Small Business: 18R/15D - formerly 19R/17D
• Veteran's Affairs: 16R/13D - formerly 17R/14D

Rep. Christopher Smith (R-New Jersey) was removed from his position as chairman of the Veteran's Affairs Committee yesterday when the GOP leadership voted him out.

Smith had angered the leadership by frequently attempting to increase spending for veteran's, winning him friends in the veteran community but ultimately costing him his position.

Rep. Steve Buyer will replace Smith in the top spot, after winning a vote among the full Republican Conference. Buyer is expected to be more partisan than Smith, who frequently employed Democratic support to enact funding increases he sought.

When Congress left town before the November election, a House-Senate Conference on the reauthorization of TEA-21 was deadlocked over the issue of the funding level for the six-year (fiscal 2004 – 2009) legislation. House GOP leaders had asserted that the highest level which could be supported by the White House was $284 billion in guaranteed funding and $299 billion in contract authority. (It must be noted that the only official word directly from the White House has been that anything above $256 billion would trigger a veto.) Senate Democrats, led by Sen. Harry Reid (D-Nevada), were insisting on a funding level of $318 billion when time ran out. The post-election session did not deal with the issue at all.

As the 109th Congress convenes, conventional wisdom has it that the number on the table (284/299) when Congress left in October represents the high water mark for potential outcomes in 2005. Rumor abounds that the Bush administration’s budget may well ratchet the number back to $256 billion as part of their effort to reduce the budget deficit by half over a five-year period. Senate Democrats, chastened by the November election results, are indicating they will be picking their fights carefully this year and that this issue may not be one of them. All of this would appear to indicate that the funding situation is not going to get any better and may get worse as time goes on.

Faced with this emerging reality, key players on Capitol Hill are looking for options. One approach being considered is to drop fiscal 2004 (now ancient history) from the package altogether and go with either a five-year bill through fiscal 2009 or a six-year bill through fiscal 2010. Extending to 2010 might allow the program to take advantage of additional economic growth which will be assumed in the President’s budget. Changing the years covered by the bill will at the very least cast the funding debate in a new light – moving everyone off the by now tired debate about $256 vs. $284 vs. $318. However, these kinds of changes may only be cosmetic. They will not change the underlying reality that available funds are not sufficient to substantially address the “donor state” problem in the highway program without creating politically unpalatable affects in other states.

Despite these apparent difficulties, committee leaders in the House and Senate have expressed their desire to move quickly to get back to conference on the legislation and have a final product enacted before the May 31 expiration of the current program extension. With the start of a new Congress, all legislation from the old Congress is dead. This means both Houses must pass again a version of reauthorization before the conference can re-start. On the House side, committee staff indicates a bill resembling very closely the TEA-LU legislation passed in the House last year will be re-introduced in the early days of this Congress. A committee mark-up is possible for February, according to staff. Plans on the Senate side are not as clear, but it is reasonable to expect early re-introduction of something close to the Senate-passed version.

Will all of this work produce a multi-year reauthorization in 2005? We have heard a variety of opinions on that question from seasoned Members and staff on the Hill. There are those who believe the odds are strong that further extensions will be required and may continue into 2006. Others are more optimistic. Stay tuned.

The House GOP Leadership has tapped Rep. Jerry Lewis (R-California) as the new Chairman of the House Committee on Appropriations. Mr. Lewis defeated Reps. Ralph Regula (R-Ohio) and Harold Rogers (R-Kentucky) for this coveted post.

Rep. Lewis is a well-respected member who has a reputation for being able to work with both sides of the aisle. There may well be subcommittee chair shifts in the days ahead. We will keep you posted on those.

Yesterday, Rep. Howard P. "Buck" McKeon (R-California), chairman of the 21st Century Competitiveness Subcommittee of the House Education and Workforce Committee, and committee chairman John Boehner (R-Ohio) introduced the Job Training Improvement Act (H.R. 27), which would reauthorize the Workforce Investment Act (WIA). The bill creates a consolidated funding stream and authorizes personal reemployment accounts of up to $3,000 for unemployed workers. In addition, separate legislation (H.R. 26) to establish personal reemployment accounts was introduced by Rep. Jon Porter (R-Nevada).

Congress was not able to complete work on the reauthorization last year.

The Washington Post is reporting that President Bush's Social Security privatization proposal will include a cut in benefits. The alteration in the benefits formula would be to move away from a wage-based index and to an inflationary index. Since wage growth typically rises faster than inflation, the current system is set up to increase retirees standard of living. Switching to an inflation-based index would ensure that the total amount of dollars given to retirees now and in the future remains constant, thus keeping the standard of living level fixed.

Such a move is sure to trigger an impassioned debate on both sides of the aisle when the measure is unveiled in February or March. Administration allies are trying to emphasize the long term fiscal problems of social security, while opponents are pointing to the large near term transition costs and increased risks of implementing any privatization system.

Last night, House Republican leaders abandoned a proposal to make it more difficult for lawmakers to discipline a fellow Member for unethical behavior. The change would have allowed Majority Leader Tom DeLay to keep his post if he is indicted by a Texas grand jury that is looking into his campaign finance practices.

Leadership appeared to yield to rank and file Republicans who were concerned that the change would send the wrong message.

The other proposed rule change abandoned by the Republicans last night would have overturned a rule that allowed lawmakers to be rebuked for bridging discredit on the House even if they didn't break a law.

One change adopted by the committee would curtail ethics committee investigations. Under the change, a Republican vote would be required before an inquiry can begin. As the committee is evenly divided, and under current rules a deadlock means an investigation begins automatically. This proposal will now move to the House floor.

As Congress moved today to express the nation's sympathy to victims of the tsunami in Asia, leaders of both parties made clear that more than condolences will be forthcoming. Senate Majority Leader Bill Frist, (R-Tennessee), pledged that Congress will move a "clean" emergency supplemental funding bill to provide relief assistance to the region, and it appears that it may exceed the $350 million President Bush has pledged as an "initial commitment." Frist said he expected the administration will be revising the $350 million figure upward as the full extent of the need becomes apparent.

Yesterday, House Republicans agreed to create a permanent Homeland Security Committee. The committee, however, is being ridiculed by critics fearing that the the proposal is riddled with limitations that will undermine the purpose of putting homeland security jurisdiction under one committee as recommended by the September 11 commission.

The new committee would have jurisdiction over the Transportation Security Administration, border security, infrastructure protection and some Customs functions. It does not include the Coast Guard, for example, which still falls under Transportation and Infrastructure Committee.

Congressman Christopher Cox (R- California) who will remain chairman of the committee said he was satisfied with the jurisdiction even though it falls short of full jurisdiction.

While there had been some talk of stripping Rep. Ernest Istook (R-Oklahoma) of his position as chairman of an appropriations subcommittee, he now appears to be safe. Rep. Istook is currently the chairman of the Transportation, Treasury and Independent Agencies Subcommittee of the Appropriations committee.

Rep. Istook angered many fellow Republicans when he excluded funds from the final version of the fiscal 2005 omnibus that were for local transportation projects sought by more than 20 House Republicans. Rep. Istook, a vocal Amtrak critic, was upset at those Republicans who signed a letter endorsing more federal funding for Amtrak. There had been early calls for the removal of Rep. Istook from his chairmanship due to this action.

Rep. Curt Weldon (R-Pennsylvania) said he will initiate a House Republican Steering Committee discussion of the way earmarks were handled, but will not call for his colleague to be removed as chairman.

The Post reported today that a variety of trade groups are attempting to roll back many provisions of the Sarbanes-Oxley Act, which was enacted after a series of corporate scandals were exposed.

Some of the provisions under attack include requiring companies to count stock options as expenses, and for mutual funds to appoint directors without ties to management. The groups affected argue that the rules unfairly penalize small businesses, while those backing the existing law maintain they are necessary to keep the system clean.

The makeup of the SEC, with five members, is expected to change this year, with Commissioner Harvey Goldschmid retiring and Roel Campos's term expiring in June. The current chairman, William Donaldson, had indicated he will remain at the helm for at least one more year. Any changes could alter the approach of the SEC drastically, as many votes have been split 3-2 over the past few years.

The House Appropriations Committee is slated for major changes when Congress reconvenes in early January. Republican rules limit the number of years that a Member can chair a full committee or subcommittee. Appropriations Committee chairman Bill Young (R-Florida) must relinquish his seat after serving six years. He is expected to take the chairmanship of one of the other major Appropriations Subcommittees, most likely either Defense or Homeland Security. The chairs of those subcommittees are in a three-way race to head the full Appropriations Committee. Rep. Jerry Lewis (R-California) must give up the chair of the Defense Subcommittee, and is seeking to lead the full committee. Homeland Security Subcommittee chairman Hal Rogers (R-Kentucky) and Labor/HHS/Education Subcommittee chairman Ralph Regula (R-Ohio) are also vying for the Committee chairman's seat. The Republican Steering Committee will decide this first week in January when Congress reconvenes from this Christmas and New Year's holiday.

Regardless of who wins the full committee chairmanship, the subcommittee chairs will be reshuffled as senior members of the committee claim the most desirable subcommittee slots. At least one current subcommittee chairman, James Walsh (R-New York), has requested a waiver to continue as chair of the VA, HUD, and Independent Agencies Subcommittee beyond his six-year term. If unsuccessful, that subcommittee could go to the current chair of the Energy and Water Development Subcommittee, David Hobson (R-Ohio), who could elect to stay in his current post or seek another subcommittee assignment. Although his term has not expired, Transportation Subcommittee chairman Ernest Istook (R-Oklahoma), might face a challenge to his chairmanship because of Republican discontent over Amtrak funding issues and the controversial IRS provision associated with him that was discovered in the Omnibus Appropriations bill, stalling adjournment and forcing a second "lame duck" session before Christmas.