House Passes Major Break

In Taxes for Businesses

The House voted to replace an illegal export subsidy with a major tax cut for domestic manufacturers and multinational corporations, setting up difficult negotiations with the Senate on one of the most significant corporate tax bills in 20 years.

Passing a corporate tax measure has become imperative. Since the World Trade Organization ruled existing export subsidies illegal, retaliatory sanctions by the European Union have tacked 8 percent onto the price of a variety of U.S. exports, from leather and jewelry to timber and thoroughbreds. The penalty will rise by 1 percentage point a month until the subsidy is lifted.

But the push to repeal a $5 billion-a-year subsidy has allowed lobbyists and lawmakers to dust off tax favors that have languished for years. The centerpiece of the House bill and the Senate's version would cut the top tax rate for domestic manufacturing from 35 percent to 32 percent, but other provisions have pushed the final House bill to 496 pages and the Senate-passed bill to 930.

The House bill, approved 251 to 178, would cut business taxes by nearly $94 billion over the next decade, although a series of revenue raisers and tax-loophole closures would trim the cost to the Treasury to $34.4 billion. The measure must be reconciled with a Senate version that would hand out $167 billion in tax cuts but more than offset that cost with tax increases and loophole closures.

-- Jonathan Weisman

Supreme Court Leaves

'Under God' in Pledge

A unanimous Supreme Court ruled that the phrase "under God" may remain in the Pledge of Allegiance as recited in public school classrooms. But the Flag Day decision fell far short of the endorsement of the pledge's constitutionality that President Bush and leaders of both parties in Congress had sought.

While all eight justices who participated in the case voted to overturn a 2003 federal appeals court decision that would have barred the phrase in public schools as a violation of the constitutional ban on state-sponsored religion, a majority of five did so exclusively on procedural grounds, ruling that the atheist who brought the case, Michael A. Newdow, lacked legal standing to sue.

Newdow had claimed that his right to influence his daughter's religious views was infringed by daily teacher-led recitations of the pledge in her Sacramento-area public school.

But the five justices noted that the child is in the middle of a custody dispute between Newdow and Sandra Banning, who wants her daughter to recite the pledge.

"In our view, it is improper for the federal courts to entertain a claim by a plaintiff whose standing to sue is founded on family law rights that are in dispute when prosecution of the lawsuit may have an adverse effect on the person who is the source of the plaintiff's claimed standing," Justice John Paul Stevens wrote in the opinion for the court.

-- Charles Lane

FTC Says Spammers Would

Ignore a Do-Not-Spam List

The Federal Trade Commission rejected as unworkable a do-not-spam list for stopping unwanted e-mail, despite the popularity and success of a similar registry for consumers who do not want telephone sales pitches.

After studying the issue for months, Agency Chairman Timothy J. Muris said a do-not-spam list would be "a waste of time" because spammers would ignore it.

More dangerous, he said, is the possibility that spammers might get hold of the list, which would provide them with a gold mine of valid e-mail addresses that would serve as targets for more spam.

Instead of starting a registry, Muris said, the FTC will first push industry to agree on a method for electronically authenticating senders of e-mail, which would cut down on spammers' ability to hide their identities and locations.

-- Jonathan Krim

Panel Advises Privatization

Of Some NASA Programs

A White House panel recommended that the government reorganize NASA and refocus space policy to encourage private companies to provide the entrepreneurship and expertise needed to implement President Bush's plan to explore the moon, Mars and the solar system.

The President's Commission on Implementation of U.S. Space Exploration Policy said the human space flight program should remain in government hands for the foreseeable future, but a "commercialized" space industry should take over robotic space ventures and, "most immediately," launches of low-Earth-orbiting satellites.

Although the commission said "it would be wrong" to view the report as "a vote of 'no confidence' " in NASA, it made several recommendations to create a more supple agency, including transforming its branches into federally funded facilities run by nonprofit organizations or the private sector. This model is used by the Energy Department's National Laboratories and by NASA's Jet Propulsion Laboratory, run by the California Institute of Technology.

-- Guy Gugliotta

Federal Reserve Chairman

Dampens Concerns on Inflation

Federal Reserve Chairman Alan Greenspan played down inflation concerns after a government report showed consumer prices rose in May at the fastest monthly rate in more than three years.

The consumer price index, the most widely followed inflation measure, rose by a seasonally adjusted 0.6 percent in May, primarily because of climbing energy and food prices, the Labor Department reported.

But after stripping out volatile food and energy costs, the so-called core CPI rose just 0.2 percent last month, and by a low 1.7 percent in the 12 months that ended in May.

Greenspan, speaking during a Senate Banking, Housing and Urban Affairs Committee hearing on his nomination for a fifth term as chairman, indicated that the central bank continues to believe it can raise interest rates gradually in coming months because inflation is likely to remain tame.

The first increase is widely expected to come at the next Fed meeting June 29-30.

But Greenspan also made clear that Fed officials are prepared to raise rates more quickly if their forecasts turn out to be wrong.

-- Nell Henderson