Under The Radar

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I don't think a lot of people noticed this in the flurry of media mania over sideshows like the Foley reports, but the House yesterday passed a major bill that would allow expanded offshore oil drilling. The bill also preserves a number of popular tax breaks for various groups.

The House voted overwhelmingly to expand offshore oil drilling and preserve a variety of popular tax breaks for families and businesses, and the Senate was poised early this morning to approve the package after lawmakers angry about trade provisions and the bill's $50 billion cost agreed to let the measure move forward.

Eight senators from textile-manufacturing states had sent a letter to Senate leaders yesterday threatening to block the bill unless they removed a proposal to lift tariffs on clothing manufactured in Haiti. And Senate Budget Committee Chairman Judd Gregg (R-N.H) delivered a blistering condemnation of the decision by Republican leaders to push the unwieldy collection of tax, trade, health and energy measures through Congress as a single package at the last minute, with few opportunities for debate or objection.

That's not to say everything in the bill was a good thing necessarily, just that the offshore drilling issue is finally moving forward. There were lots of people unhappy with parts of the bill but there were a number of things that would have been very unpleasant surprises come tax filing time if the bill had not passed:

Throughout the day yesterday, negotiations over the tax-and-trade package consumed lawmakers, particularly in the Senate. With the trade measures under assault, House leaders delayed a vote on that portion of the package and focused first on the more popular tax provisions. By 367 to 45, the House voted to extend for two years nearly two dozen tax breaks, most of which expired in December 2005. They include a credit for research and development critical to many businesses, a reward for employers that hire former welfare recipients and a deduction for state and local sales taxes paid by people in states without income taxes.

If Congress had left town without extending the breaks, more than 19 million taxpayers would have faced higher taxes when they filed in April, said Senate Finance Committee Chairman Charles E. Grassley (R-Iowa).

The package also would repeal a $5,450 limit on contributions to health savings accounts, allowing taxpayers to shelter an unlimited amount of money as long as they choose certain insurance plans with high deductibles. It would stave off a scheduled 5.1 percent cut in payments to doctors who treat Medicare payments, and it would open 8.3 million acres in the Gulf of Mexico to oil and gas exploration.

The House approved the trade portion of the package by 212 to 184. That measure would grant permanent normal trading status to Vietnam and extend trade relations with some African and Andean countries, as well as some other developing nations. The measure also would allow some types of clothing made in Haiti to be imported duty-free. Supporters call the proposal a form of aid to one of the world's poorest countries, while opponents say it would destroy U.S. textile jobs by opening a tax-free door to Haitian goods manufactured with yarn and fabric from China.

With an already announced protectionist element in the Democrat's incoming majority, it may well become tougher to get trade agreements in the future. I'm not crazy about the Vietnam part of the bill, and I know a number of other folks have been really angry about it as well. But given the enormous oil strike already made this past summer in the Gulf, opeing up more areas makes sense.

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