Election 2012

Congress, With Much to Do, Splits for 5 Weeks' Vacation

AP with CNBC.com

After a final day of partisan battles that prevented action on a massive relief package for drought-striken farmers and on protecting the nation from cyberattacks, Congress has left for five weeks of vacation, facing a fall fraught with decisions on the political and economic future of the country.

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Most lawmakers were headed home to make their party's case for who should be entitled to tax cuts, how the government should avoid automatic cuts to defense and domestic programs and who should be the next president.

Many will drop by the Republican and Democratic presidential conventions in Tampa, Fla., and Charlotte, N.C., respectively.

The last day, Thursday, saw lawmakers fall short in finding agreement on two pressing problems: how to help livestock producers suffering from the widespread drought and how to protect critical industries from cyberattacks launched by terrorists or other enemies.

The GOP-led House narrowly approved a bill that would revive expired disaster relief programs for cattle and sheep farmers who have seen the price of feed soar because of drought damage to corn and other crops. But the Senate, controlled by Democrats, sidestepped action on the bill, saying that it was insufficient and that the House should instead consider a comprehensive five-year farm policy bill that the Senate passed in June.

The Senate also reached an impasse on legislation to bring the government and businesses together to protect the nation's infrastructure from cyberattacks. The main stumbling block was the role the Homeland Security Department and other federal agencies should play in protecting U.S. businesses.

Republicans blocked further consideration of the Senate bill, supported by the White House, saying it would lead to Washington imposing a heavy hand on the private sector without substantially reducing risks. Both parties said they were committed to approving a final bill when they return in September, although bridging differences in their approaches will not be easy.

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Congress also highlighted differences on taxes that will dominate the congressional scene this fall. The Senate Finance Committee, on a bipartisan vote, approved a $200 billion-plus package to renew dozens of tax breaks for businesses such as biodiesel and wind energy producers. On the other side of the Capitol, the House voted mainly along party lines to pass legislation putting the House on record in support of tax reform that would lower the top income tax rate to 25 percent and end some of the types of special interest tax breaks included in the Senate measure.

Senate Finance Committee members defended their actions, saying they had succeeded in eliminating almost 20 existing tax breaks. Among those being allowed to expire was a tax credit for ethanol producers. The annual package of special interest tax credits had grown from 42 items in 1998 to 154 last year.

Taxes will take center stage this fall when Congress must decide how to handle the Bush-era tax cuts set to expire at the end of the year. The Senate has joined President in calling for the termination of those tax cuts for people earning more than $200,000 a year and couples making more than $250,000.

The House on Wednesday voted to fully renew the expiring tax cuts.

Also on the agenda is what to do about $110 billion in automatic spending cuts to the Pentagon and domestic programs that will occur in January, the result of the failure of the congressional supercommittee commissioned last year to come up with a deficit-reduction plan. Economists worry that the inability of Congress to find common ground on the tax cuts and the automatic spending cuts could force the nation over a "fiscal cliff," driving the economy back into recession.

The Senate Appropriations Committee, meanwhile, approved a $604 billion defense spending plan for next year that is $29 billion less than current spending but reverses proposed Pentagon cuts in Air Force personnel and equipment. The committee rejected a Republican proposal that would have required defense contractors to send out notices of possible job layoffs related to the automatic cuts just before the November presidential election.

House Speaker John Boehner, R-Ohio, and Senate Majority Leader Harry Reid, D-Nev., were able to put off one impending disaster when they last week on extending federal programs for six months, averting a possible government shutdown when the fiscal year ends on Sept. 30.

House Majority Leader Eric Cantor, R-Va., issued a statement that, if the Senate was willing to go along, the House was prepared to bring up legislation in September to approve permanent normal trade relations with Russia. Russia is set to join the World Trade Organization on Aug. 22, and unless Congress removes current trade restrictions, U.S. businesses will not be able to take advantage of lowered trade barriers that will accompany Russia's entrance into the WTO.

The House also began its day Thursday on a united if somber note, voting by voice to reprimand one of its own, California Democrat Laura Richardson, for forcing her congressional staff to do campaign work and violating codes of conduct for government service.