Congress's Last Acts Include Tax Breaks

By Jonathan Weisman and Stephen Barr
Washington Post Staff Writers
Sunday, December 10, 2006

The rancorous 109th Congress adjourned yesterday morning with final passage of measures to expand civilian nuclear trade with India, establish permanent trade relations with Vietnam and extend a bevy of expiring business tax breaks.

Legislation that would overhaul the U.S. Postal Service for the first time since 1970 and could hold down the cost of mailing letters also cleared the Congress and was sent to the president. A presidential commission and the Government Accountability Office had called for changes in how the Postal Service operates as Americans increasingly communicate and do business through e-mail and the Internet.

But last-minute Republican budget squabbles marred the final hours of a Congress already tainted by scandal, indictments and resignations, and ushered out Republican control on a discordant note. The 109th Congress ended having logged fewer days of legislative activity than even the infamous "Do-Nothing Congress" of 1948.

"You know, it's sort of that old Pogo line, 'We've met the enemy, and he is us,' " fumed Senate Budget Committee Chairman Judd Gregg (R-N.H.), as the Republican-controlled Congress moved toward final passage of tax cuts and spending measures that would expand the budget deficit.

Senate Majority Leader Bill Frist (R-Tenn.) ended his own Senate career and called the Congress adjourned at 4:35 a.m., telling a near-empty Capitol, "I will truly miss each and every one of you."

The centerpiece of the closing hours' work was a tax-and-trade bill. The measure temporarily extended expiring tax breaks for business research and development and for hiring people off the welfare rolls, a partial college tuition deduction, and energy conservation incentives. It extended a generous deduction for state and local sales taxes that was slipped into a business tax law in 2004 as a temporary measure to win votes in states without income taxes but is taking on an air of permanence.

The huge package also contained measures to permanently normalize trade with Vietnam and extend trade benefits for four Andean nations, sub-Saharan African countries and Haiti. The Haiti provision was strongly challenged by some Southern lawmakers, who said it would further erode jobs in their states' textile industries.

The U.S.-India nuclear cooperation deal set aside years of U.S. nonproliferation policy that forbids the trade of nuclear-reactor technologies to nations that refused to sign the international nuclear Non-Proliferation Treaty, such as India. A strong bipartisan majority argued that the policy was an impediment to improved relations between the world's largest democracies. President Bush hailed the action as a means of enabling India and the United States to work together to promote energy production without polluting the atmosphere or contributing to global warming.

Democrats secured a provision blocking an automatic pay raise for Congress until Feb. 16, when a stopgap spending measure to keep the government operating is set to expire. Democratic leaders had argued that Congress should not get a pay hike until lawmakers approve the first increase in the minimum wage since 1997, a measure they hope to pass well before mid-February.

But debate that stretched into the morning yesterday centered on the fiscal stewardship of a Republican Congress that saw record budget surpluses turn into record deficits. Gregg and a handful of other Republican budget hawks held up passage of the tax-and-trade bill because the measure's 10-year, $50 billion price tag would void deficit-control measures. Ultimately, the Senate overrode those objections.

The Postal Service measure has been in negotiation for the past three years. The Postal Service is a linchpin of the economy, touching more than 9 million jobs and about $900 billion in commerce.

Sen. Susan Collins (R-Maine), a chief sponsor, called the bill "great news for the future of an institution that is critical to our economy and will ensure the continuation of universal postal service at an affordable rate."

The legislation would replace the lengthy and litigious process used to raise the price of stamps and some other postal rates with a price cap, limiting rate increases to the rate of inflation for a 10-year period. The change would inject more predictability into postal increases, especially for the magazine industry and other large mailers. It also would permit the Postal Service to more quickly offer discounts for its services, such as promotional rates to attract business in holiday seasons.

The Postal Service also gets billions of dollars in financial relief under the bill. Costs for military pensions earned by postal workers during their time in the armed forces would be shifted from the Postal Service to the Treasury, the practice for most federal agencies. The bill also would release money from an escrow fund to cover postal retiree health-care liabilities.

The legislation would replace a rate-review commission with a more powerful Postal Regulatory Commission, which could set some postal rates and examine postal financial management practices.

Postmaster General John E. Potter congratulated House and Senate negotiators "for making reform a reality" and said the agency looks forward to implementing the changes.

"Over the long run, the whole postal system will, I believe, experience higher-quality service and lower cost than it would have," said Michael J. Critelli, chairman of the Mailing Industry CEO Council.

© 2006 The Washington Post Company