Report on the 109th Congress, First Session 

January, 2006  

           
Social Security
Perhaps the best news out of the first session of the 109th Congress was the rejection of the congressional Republican leadership’s efforts to undermine guaranteed Social Security benefits by establishing private accounts.
 
The importance of this victory should not be underestimated. If Social Security were destroyed, the consequences for existing pension and health insurance plans would have been dramatic. Privatization of Social Security would have created a strong wedge to undermine both defined-benefit pension plans and employer-provided health insurance.
 
Many of you participated in this successful and important fight and are to be congratulated for your efforts.
 
The defeat of privatization is not stopping AFT’s efforts to repeal the Windfall Elimination Provision (WEP) and Government Pension Offset (GPO), two Social Security provisions that penalize the 25 percent of public employees with pensions not covered under Social Security. It’s unclear now whether a change in the Republican House leadership will produce any movement on WEP or GPO. Former Majority Leader Tom DeLay did not support reform or repeal, even though most public employees in his home state of Texas were heavily penalized by these provisions. More likely, any repeal or reform of WEP/GPO would be part of a White House and Republican leadership strategy for the privatization of Social Security.
 
But make no mistake, the failed effort to privatize Social Security is part of a coordinated effort to remove such essential benefits as pensions and employer-provided health insurance and shift these responsibilities entirely to employees. 
 
The AFT will continue to fight this very real and dangerous trend. 
 
Other Major Issues
The other major issues in the first session of the 109th Congress were the war in Iraq/the fight against terrorism, the effort to rebuild the areas destroyed by Katrina and other hurricanes, budget and tax fights and, most recently, the congressional scandals.
 
Iraq has affected the legislative process because there is no bipartisan agreement on the war, aside from protecting our troops. The war has eroded popular support for the president, with the debate over the need to go to war superseded by a heated debate over an "exit strategy." The direction, however, is clear—a future reduction in U.S. forces, motivated by the 2006 election. Already, the Department of Defense has announced that 7,000 troops will be withdrawn. Debate continues on the legality of residentially ordered wiretaps without prior court approval. It is clear that Iraq has led to a less-than-favorable evaluation of the president's foreign policy and domestic agenda.
 
Congressional efforts to rebuild areas devastated by Katrina and other hurricanes have slowed, but Congress did pass an additional $29 billion in aid before it left for the holidays. There is increasing skepticism, however, that the federal effort can and will address the needs of this devastated area in the near future. There are also serious efforts to undermine the restoration of public education by establishing charter schools and vouchers in the affected areas. More than 100 of the some 120 schools in the district can now be reopened as “union free” charters under state legislation passed in November. The AFT is fighting hard against these ideologically driven challenges to public education.
 
It is clear that the erratic Katrina federal effort requires continuation of private efforts.  AFT’s Katrina fund is approaching $2 million, of the total of $3 million our union has committed to the relief effort. The union is distributing $500 grants to members and their families who have been decimated by the hurricanes. With the media spotlight turning elsewhere, it is more important than ever for you to contribute. You can make your tax-deductible contribution online by going to http://www.unionvoice.org/ct/Rd1GNg611uWP/.
 
The congressional scandals have shaken up the House Republican leadership. Representatives DeLay and Ney have already stepped down as majority leader and administration committee chair, respectively. The House leadership is now awaiting the election of a new majority leader on Feb 2. The Abramoff scandal may threaten dozens of members of Congress and former staff. It assures that the first several months of the second session will be taken up with “lobbying reform,” which will probably have no significant impact on the way Congress does business. This major scandal, however, will divert attention from federal government spending and tax policy, which has resulted in unsustainable annual increases in the federal debt.
 
Spending Reconciliation Legislation
The effort to get the budget under control continues to falter. The Republican-led Congress took a step to cut programs in the spending reconciliation bill and then turned around and added another bill to reduce taxes for the wealthiest Americans. Taken together, these two bills will actually increase the federal debt. 

The spending reconciliation bill is a $39.7 billion series of cuts in benefits for mandated or required federal domestic spending. For the most part, it is the poor and middle class who lose benefits. This bill awaits final House action in early February. The conference version contains cuts in child care support enforcement and requires a cut of $1.5 billion over the next five years. This cut will result in a reduction of child-support payments by approximately $3 billion!
 
The cost of college education for individuals and families will increase due to a $12.7 billion cut in student loan programs. The result will be higher interest rates and fees for loans. It is estimated that the average student loan of $17,500 will increase by $5,800 because of higher interest rates and fees.
 
But of most concern are the changes in Medicaid. The bill contains cuts to providers and beneficiaries in areas such as home healthcare. But new changes will allow states to restrict eligibility and establish co-pays and deductibles for Medicaid beneficiaries. These significant changes, according to the nonpartisan Congressional Budget Office, will result in beneficiaries not seeking care. In other words, the changes will force beneficiaries out of Medicaid. These beneficiaries are expected to seek uncompensated care, which will not only affect providers such as hospitals but also increase the cost of healthcare to patients who pay for services or have health insurance because providers shift costs to them to pay uncompensated care.
 
In addition, there are significant changes for elderly Americans who rely on Medicaid for nursing home assistance. The “look back” provision of the bill, which is designed to assure that a person has not disposed of income to qualify for Medicaid long-term care, is extended from three to five years. If assets were given away during this period, for any reason, including helping in family emergencies or helping pay grandchildren’s college tuition, Medicaid eligibility will be delayed until the amounts given away are paid to the nursing home or home care service. This provision will result in denying many of the elderly poor long-term care as providers turn a skeptical eye to those who have established trusts and frail elderly patients are unable to pay the cost of their care.

Further, the health provisions in the reconciliation bill protect both the insurance industry and the pharmaceutical companies from any significant cuts while relying almost exclusively on benefit cuts for the poor.

In addition, the part B premium for all Medicare beneficiaries will be increased to pay for higher reimbursement for doctors.

This complicated 700-page bill was voted on in the House at 6 a.m., and the final copy of the bill was only available three hours before the vote.
 
Since the Senate made a small change in its version of the reconciliation conference, the House will be faced with another vote on the revised bill Feb. 1. The AFT is strongly opposed to passage of this inequitable legislation. There is still time for you to contact your U.S. representative to ask him/her to vote against the reconciliation bill. AFT’s toll-free number 1/866/327-8670 and it will connect you directly to the U.S. Capitol. When the operator answers, just ask for your Representative’s office.

Taxes
As noted, the congressional budget process is being used not only to cut benefits for the less fortunate but also to decrease taxes for the well off. This year, Congress is permitted to reduce taxes by $70 billion without any revenue offsets. Since the spending cuts only total $39.7 billion, if the legislation runs true to form, the tax decreases will exceed spending cuts, and the federal deficit will be increased significantly.
 
The major debate over the tax bill centers on its size and content. The House version would make permanent capital gains and dividend cuts. The current reduction in these taxes expires in 2008, but this tax cut is both the White House and Republican leadership’s highest priority. According to the research of Citizens for Tax Justice, the richest 1 percent of Americans, with an average income of $1.3 million, will get 53 percent of this tax benefit. The average tax cut for this group will be $12,000, while 78 percent of taxpayers get nothing, and another 10 percent get under $100.
 
While there are good reasons for tax legislation, such as reducing the Alternative Minimum Tax, which is raising taxes substantially for more and more middle-income families, it is possible to provide these necessary changes by closing tax loopholes and not extending tax cuts that benefit the very wealthy. Both the House and Senate have passed their versions of the tax bill, and Congress is likely to draft a final version in February.
 
The AFT is working to implement a progressive tax bill that will actually contribute to necessary deficit reduction.
 
Medicare Part D Prescription Drugs
As many of you work your way through the Medicare prescription drug plan alternatives, the AFT continues to press for changes in this flawed program, even though enactment of these changes is not expected in this session of Congress. The major changes we are seeking would allow Medicare to administer a national program to compete with private plans and negotiate discounted prices with the drug companies. The AFT is continuing efforts to legalize purchase of drugs from Canada, but legislation, even if passed, faces a veto from the president. A reminder: AFT retirees have created a special Q&A on Medicare Part D and an Internet service that can assist you in choosing a Part D plan. You can also compare plans in your area on the Medicare Web site: http://www.unionvoice.org/ct/R71GNg611uWQ/. You can link to both AFT services by going to http://www.aft.org.
 
Retiree Health Coverage
Stories about the future costs of public retiree health plans have recently become a media staple. The costs are often portrayed as astronomical—hundreds of millions and in some cases, billions of dollars. The root of these stories is a change in accounting rules, not congressional action. For several years, the AFT has been working to assure the new accounting rules developed by the Government Accounting Standards Board, the most influential accounting trade association, would not threaten existing plans. Unfortunately, the efforts of our coalition of other unions and retirement plans were not successful. The problem is most public retirement health plans had reported retirement healthcare costs annually. The new accounting rules require these costs be projected and reported for 30 years in the future. The change significantly increases the reported cost of the benefits and will increase pressure to reduce or eliminate these essential benefits; even though health and insurance experts agree that 30-year projections of healthcare costs are meaningless, since no one can foresee major medical breakthroughs or new pandemics that might arise over such a time span. The AFT will continue to fight such cuts in the political arena and at the bargaining table.

Public Pensions
As with retire health coverage, there are now stories about the perilous state of defined- benefit public pension plans. Opponents of state and local government are striving to kill defined benefit pension pans to make public service less desirable. They are being aided indirectly as more employers in the private sector abolish their defined benefit plans. The AFT worked in California to stave off Gov. Schwarzenegger’s drive to convert all public employee plans from defined-benefit to defined-contribution plans. A similar effort in Alaska was, unfortunately, successful. As of this year, all new public employees hired in that state can only participate in a defined-contribution plan. More than 20 states now report some activity attacking the traditional defined-benefit pension system.

The AFT has developed background data, analyses and other means to help fight off these threats, and will continue to lobby vigorously to prevent such conversions.

The Future of the 109th Congress
There are reports that President Bush will not have a big legislative agenda for the coming year. As mentioned, Congress will be busy with "lobbying reform" to try to shake off the public outrage over the Abramoff scandal.

Congress will finish the FY 2006 spending and tax budget reconciliation bills, but it is unclear if there will be a repeat in the new FY 2007 budget cycle that begins later this month. Debate will continue over the Patriot Act, and residentially ordered wiretapping is likely to come under some modest congressional oversight. 

It is unlikely that the president will forward a new controversial "tax reform" package. The commission President Bush appointed put forward some very unpopular proposals, such as the abolition of the tax break for mortgage interest, and this Congress does not want to take on difficult decisions in an election year.

The Legislation Department and all of AFT are very thankful for your participation in congressional fights last year—KEEP IT UP!

If you need help or more information on these issues in your state, feel free to contact associate director of legislation Bill Cunningham at mailto:bcunning@aft.org?subject=109th Congress or call 1/800/238-1133, ext. 6301.