Debt Ceiling Legislation Has No Revenue Raisers, But Sets Up Joint Congressional Committee to Draft Legislation on Deficit Reduction

While the final legislation raising the debt ceiling will not contain any revenue raisers such a carried interests provisions affecting asset managers, it is highly likely that it will establish a bi-partisan Joint Select Committee of Congress charged with drafting legislation to reduce the deficit under expedited procedures providing for an up or down vote by the end of the year. Senator John Kerry (D-MA) analogized the process endorsed by the legislation as similar to the military Base Realignment and Closure Commission. There is a distinct possibility that the Joint Select Committee's draft legislation will include elements of tax reform similar to the so-called grand bargain between the Administration and House Speaker John Boehner (R-OH) that ultimately fell apart. This scenario, which is by no means certain but may appear more probable as the members of the committee are appointed, could address tax reform issues around carried interest, LIFO accounting, off-shore tax havens and the is misalignment of the federal rax code and financial accounting standards that can have a profound impact on company financial statements filed with the SEC A blueprint of the final legislation establishing the Joint Select Committee may be gleaned from the Budget Control Act, S 637, which passed the House on July 29, 2011. The Joint Select Committee would be composed of six Senators and six Represenatives, evenly divided by party, appointed by House and Senate leaders. The Committee Co-Chairs would be appointed by Senate Majority Leader Harry Reid (D.NV) and House Speaker John Boehner (R-OH). By November 23, 2011, the Joint Select Committee must vote on a report containing a detailed statement of the findings and recommendations of the Committee, with legislative language to carry out the recommendations. The report and the proposed legislative language requires the approval of a majority of the Committee. The Select Joint Committee must, by December 2, 2011, submit its report and the legislative language to the President, the Vice President, the Speaker of the House, and the Majority and Minority Leaders of both Houses. The must also promptly make the full report and legislative language, and a record of the vote, available to the public. In performing its duties, the Select Joint Committee may hold hearings, require attendance of witnesses and the production of documents, take testimony, receive evidence, and administer such oaths the Committee considers advisable. The legislation provides for an expedited Congressional consideration of the legislation recommended by the Joint Select Committee. The proposed legislation must be introduced in the Senate on the next day on which the Senate is in session by the Majority Leader or his designee and, similarly, must be introduced in the House of Representatives on the next legislative day by the House Majority Leader or his designee. Any committee of the House or Senate to which the Select Joint Committee bill is referred must report it to the House or Senate floor without amendment by December 9, 2011. The House and Senate must vote on the Committee's proposed legislation by December 23, 2011 and no amendments will be permitted.

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