PUBLIC POLICY UPDATE January 4, 2013 WASHINGTON UPDATE The Fiscal Cliff The last-second, nail-biting fiscal cliff

agreement that Congress passed Jan. 1 is mostly focused on taxes, rather than spending, as has been widely reported. As a result of the deal, most of us have heard by now that the bill permanently extends Bush-era income tax cuts for individuals earning up to $400,000 and couples making up to $450,000, allows tax rates to rise for those earning more than that, and changes the tax code in a number of significant ways. But the bill also has an impact on spending, including a sequestration delay and changes to the discretionary spending caps for the next two years. What effect will those changes have on foreign aid and the programs InterAction members follow most closely? Discretionary Spending The bill lowers the cap on discretionary spending, or the government money that Congress appropriates every year (as opposed to mandatory or direct spending, which is automatic and goes toward programs such as Social Security and Medicare). It sets the total discretionary spending cap for fiscal year (FY) 2013 at $1.043 trillion, which is $4 billion lower than the previous $1.047 trillion cap set in the Budget Control Act in August 2011. Congress will need to determine where to cut spending to cover the $4 billion reduction, which represents an approximate 0.4 percent cut to the total FY2013 budget. If the cuts are distributed evenly across all agencies and departments (which is by no means a certainty), a 0.4 percent cut to foreign assistance programs would translate into roughly $100 million less in FY2013 for the accounts InterAction cares most about. That said, Congress has not yet produced final appropriations for FY2013 to begin with, so it is impossible to know exactly what level to start from before subtracting the $100 million. Security vs. Non-Security The $4 billion in reduced discretionary spending will be split evenly between security and nonsecurity spending, but due to some very complicated math, foreign assistance programs and the 150 account as a whole (which funds most of our foreign assistance programs) has ended up back on the security side of the ledger for FY2013 (where it had temporarily been housed for a few months in 2011). This could mean foreign assistance will have to temporarily compete with defense, homeland security and veterans for congressional money. Sequestration The deal also postponed sequestration for two months, so that it will go into effect on March 1, unless Congress agrees to a deficit reduction deal before then. While many in our community had hoped for a more permanent fix for sequestration, a delay in sequestration is better than its immediate enactment: The across-the-board spending cuts for FY2013 will now total $85 billion 1

when they go into effect in March, instead of $109 billion had they gone into effect in the beginning of January. Half will come from security spending and half will come from non-security spending. Due to a quirk in the new law, foreign assistance will return to the non-security side of the ledger when the current continuing resolution expires. Stay tuned for more details on that. Farm Bill The bill does include some help for the worlds poor by extending most of the 2008 Farm Bill through the end of September. This extension includes authorizing funding for the McGovern-Dole International Food Program, as well as for Title II agreements under the Food for Peace Act (since they were not explicitly excluded from the extension). Had they been eliminated, the U.S. would have been unable to respond to disasters with Title II food aid. Charitable Deductions The deal does not address charitable deductions directly. But it reinstates the so-called Pease limitation, (named for its original congressional champion), which reduces the overall value of itemized deductions of certain higher-earning taxpayers, for income levels starting at $250,000. So while the Pease limitation wont harm charitable giving to the same extent as complete elimination of the charitable deduction might have, there could still be some downward pressure on charitable giving going forward. Looking ahead, there are still a number of hurdles that policymakers will need to clear in the coming months: Treasury Secretary Timothy Geithner has already notified Congress that the debt limit has been reached and that Congress will need to raise it soon so that the Treasury Department will be able to continue paying the governments bills; sequestration now begins in March and must be dealt with before the across-the-board spending cuts take effect; and the stopgap spending bill that currently funds the government will end in March, setting up another fiscal cliff for Congress and the administration to clear. This next round of negotiations may make the last one look easy. Stay tuned

The Poe Bill The Foreign Aid Transparency and Accountability Act (H.R. 3159), sponsored by Rep. Ted Poe (R-TX), passed the House of Representatives on December 30 by a vote of 390-0. However, due to resistance by Sen. Tom Coburn (R-OK) against efforts to move the bill in the Senate under unanimous consent, the Senate adjourned without considering this legislation. The bill now will need to be reintroduced in the 113th Congress and passed by both the House and Senate. We will keep you updated as we hear more.

Committee Assignments Senate Foreign Relations Committee On January 3, the Senate Republican Conference announced committee assignments for the 113th Congress, which completes all Senate committee rosters, since the Democrats had already announced theirs before the end of last year. While each committee will change to some degree, the Senate Foreign Relations Committee (SFRC) GOP roster is due for some particularly significant changes. Senators James Inhofe (R-OK), Johnny Isakson (R-GA) and Mike Lee (R-UT) 2

will be departing the committee, along with Sen. Jim DeMint (R-SC), who is resigning his Senate seat this month to join The Heritage Foundation. They will be replaced by Senators Ron Johnson (R-WI), Jeff Flake (R-AZ), John McCain (R-AZ) and Rand Paul (R-KY). While McCain has long been a strong voice on foreign relations and has often allied himself with Senate champions of foreign aid, his other new SFRC colleagues have been very outspoken budget hawks and sometimes isolationists. In the two years since he arrived in the Senate, Paul has offered numerous amendments to slash foreign aid and Johnson has often supported them. Flake, meanwhile, was for many years one of the House of Representatives chief opponents of earmarking and government spending and will likely bring that same inclination with him to the Senate. This news comes on top of the changes on the majority side, where Chairman John Kerry (D-MA) will of course be leaving shortly to serve as Secretary of State (pending his confirmation) and Sen. Robert Menendez (D-NJ) is next in line to take over the committee. The Democrats have also added freshmen senators Chris Murphy (D-CT) and Tim Kaine (D-VA) to SFRC. Murphy served on the House Foreign Affairs Committee in the last Congress and Kaine has had a longstanding interest in foreign relations and foreign assistance issues, having spent a year in Honduras working with the Jesuit order as a Catholic missionary. Here is the full roster for the Senate Foreign Relations Committee for the 113th Congress (new committee members in bold): Democrats: Chairman: John Kerry (MA)* Barbara Boxer (CA) Robert Menendez (NJ) Ben Cardin (MD) Robert P. Casey, Jr. (PA) Jeanne Shaheen (NH) Chris Coons (DE) Tom Udall (NM) Chris Murphy (CT) Tim Kaine (VA) Republicans: Bob Corker (TN) James Risch (ID) Marco Rubio (FL) Ron Johnson (WI) Jeff Flake (AZ) John McCain (AZ) John Barrasso (WY) Rand Paul (KY) *Note: Kerry is expected to leave shortly to serve as Secretary of State. House Foreign Affairs Committee The House Foreign Affairs Committee will also see a huge number of new faces, including a significant number of freshmen, although the Democrats have not yet announced their roster yet. As previously announced, leadership of the committee will also change, as Reps. Ed Royce 3

(R-CA) and Eliot Engel (D-NY) will take over as chairman and ranking member, respectively. So far, announced members include (new committee members are in bold and freshmen have asterisks by their names): Republicans: Chairman: Ed Royce (CA) Chris Smith (NJ) Ileana Ros-Lehtinen (FL) Dana Rohrabacher (CA) Steve Chabot (OH) Joe Wilson (SC) Michael McCaul (TX) Ted Poe (TX) *Matt Salmon (AZ) Tom Marino (PA) Jeff Duncan (SC) Adam Kinzinger (IL) Mo Brooks (AL) *Tom Cotton (AR) *Paul Cook (CA) *George E.B. Holding (NC) *Randy Weber (TX) *Scott Perry (PA) *Steve Stockman (TX) *Ron DeSantis (FL) *Trey Radel (FL) *Doug Collins (GA) *Mark Meadows (NC) *Ted Yoho (FL) *Luke Messer (IN)

UPCOMING HEARINGS There are no upcoming hearings this next week.

ARTICLES AND REPORTS Al Jazeera Jan. 2: Measles outbreak kills hundreds in Pakistan More than 300 children died of measles in Pakistan in 2012, the World Health Organisation (WHO) has said. It did not give any reasons for the increase from the previous years figure of 64 deaths, but local officials have blamed a lack of family vaccinations in Sindh province. BBC Jan, 2: India gang rape: Thousands of women march in Delhi

Protests continued in the Indian capital, Delhi, on Monday, as thousands of women marched demanding an end to sexual violence against women. Many are calling for stricter anti-rape laws and justice for the rape victim who died last week. IPS Jan. 2: Controversial Anti-TB Drug Approved in U.S. The Food and Drug Administration (FDA) has approved a controversial new treatment for multidrug-resistant strains of tuberculosis. The drug was approved after two phases of testing, instead of the normal three, prompting disagreement over its potential impact on TB worldwide. Reuters Jan. 1: Gunmen in Pakistan shoot dead seven aid workers near capital Gunmen shot and killed seven Pakistani aid workers, six of them women, in Swabi district on Tuesday. The attack occurred as the group was heading home from the community center they worked at, run by local NGO Ujala. Washington Post Jan. 2 Syrian death toll tops 60,000, U.N. says The U.N. Human Rights Commissioner announced on Wednesday that more than 60,000 people have been killed during the Syrian conflict. This number far exceeded any estimates, even those of the opposition groups. This announcement came the same day as the Syrian military was accused of killing almost 70 people in an airstrike on a gas station.
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