March CEO Report - Washington Update

Welcome to the March edition of the CEO Report, POLITICO Pro's high-level outlook on the policy issues driving the month ... and beyond.


Breaking the cycle: For the fourth month in a row, another government funding deadline is on the horizon, writes Pro Budget and Appropriations' Jennifer Scholtes. But lawmakers are hoping to break the "cycle of dysfunction" this time by passing a catchall bill that updates funding levels through the end of the fiscal year, Sept. 30, rather than keeping the government idling at last year's levels for another short stint. The details of that package are still under wraps as the 12 spending subcommittees haggle over their pieces of the pie. Several of the dozen chunks of the impending "omnibus" are pretty much finished, while others are still in flux. Almost totally penned: Spending levels for science agencies and the departments of Transportation, Commerce and Justice.

Don't fret. The threat of shutdown looks low this month, since lawmakers from both sides of the aisle are desperate to finally finish a sweeping spending package so they can move onto negotiating funding levels for fiscal 2019, which begins in just seven months. It won't be a surprise, though, if leaders can't complete their work on the fiscal year 2018 omnibus by the March 23 deadline. In that case, both chambers are likely to easily pass another short patch to buy a few extra days to seal the deal.

Since the funding package is one of the only must-pass bills in the months to come, lawmakers are eyeing the measure as a vehicle for policy issues that have less momentum. That list of potential tag-alongs includes provisions aimed at stabilizing Obamacare, laying out standards for online sales taxes and a raft of stalled telecom measures.


Will Trump go all the way on tariffs? March came in like a lion with President Donald Trump's announcement that he plans to impose a 25 percent tariff on steel imports and a 10 percent tariff on aluminum. More details - such as whether any countries will be exempted (probably not) - are expected when Trump signs the actual order sometime this week.

Targeted countries could immediately retaliate with their own tariffs on goods they import from the United States. They can also go to the World Trade Organization to challenge the U.S.'s rationale on the tariffs.

Tariffs upend NAFTA talks: The seventh round of NAFTA talks wrap up today with expected news conferences in Mexico City by U.S. Trade Representative Robert Lighthizer and his Mexican and Canadian counterparts. Those could give clues about whether talks are likely to finish this year or drag on into 2019 - even as Trump's tariff announcement scrambled NAFTA negotiations. The next round of talks is expected to be held in early April in the Washington area.

Fast track for trade deals: By the end of the month, Trump must formally notify Congress of his intention to seek a three-year extension of Trade Promotion Authority, which allows his administration to negotiate trade deals that can be sent to Congress for a straight up-or-down vote without any amendments. The notification would give Congress up to three months to approve or deny him the renewal.

On the hot seat: Lighthizer could be called to testify on Trump's trade agenda before House Ways and Means and Senate Finance committees this month. That's a regular spring ritual, but no dates have been announced yet.

Relief for free traders? The Senate also may take up the Generalized System of Preferences and the Miscellaneous Tariffs Bill as part of any spending measures. The renewal of the two programs, which cut tariffs on thousands of products imported by U.S. companies, could be a bright spot for businesses in an otherwise dismal time for free trade. - Doug Palmer


DREAMers' deadline arrives: When Trump announced in September that he'd wind down the Deferred Action for Childhood Arrivals program, he set March 5 - today - as the deadline for Congress to take action. Congress hasn't done that. What now?

Under the administration's phase-out plan for DACA, so-called DREAMers whose enrollment expired today or before were given a final opportunity to renew in September and early October 2017. Any Dreamer whose DACA enrollment was due to expire after today - and that's most of them - would lose permission to work and become vulnerable to deportation. The Trump administration hoped that threat would move Democrats and pro-immigration Republicans to agree to new limits on legal immigration and other restrictive policies in exchange for writing DACA protections into law. But the threatdidn't work.

Judges intervene: Why didn't the March 5 deadline force a solution? Mainly because it stopped mattering much in early January after a federal judge in San Francisco ordered the Homeland Security Department to resume accepting renewal applications (halted since early October). A second federal judge in Brooklyn issued a similar order in mid-February. The Justice Department petitioned the Supreme Court to squelch the San Francisco judge's order, but the high court declined to address the matter until it works its way through the lower courts. Consequently, DACA renewals will likely continue for months, if not longer.

Living dangerously: The court injunctions mean people whose DACA enrollment expires after today can still apply to renew, contrary to Trump's original plan. But the March 5 deadline isn't completely meaningless. Some DREAMers will likely lose DACA protection while they await renewal processing, simply because DHS won't have moved fast enough. That means they'll lose DACA's work protections and will face some threat of deportation until their renewals are approved.

Zombie DACA: Another consideration is that DACA enrollees may not seek renewals in large numbers. Statistics from U.S. Citizenship and Immigration Services show that only about 11,000 people sought DACA renewals during the three weeks after the San Francisco judge's ruling. The libertarian Cato Institute estimated in September that roughly 33,000 people per month would lose DACA protections after March 5. That number is lower now, because of the judges' reprieve, but it isn't zero. For the immediate future, a sort of zombie DACA will remain in force. - Ted Hesson


Anti-sex trafficking bill on the move: A sex trafficking measure that worries Silicon Valley could become law this month. Senate Majority Leader Mitch McConnell said he plans to bring to the floor next week a bill passed by the House, H.R. 1865 , that would amend Section 230 of the Communications Decency Act to allow criminal and civil actions against websites that facilitate sex trafficking. A handful of tech titans including Facebook's Sheryl Sandberg have thrown their support behind the bill, but others say passage would expose companies like Google and Twitter to massive lawsuits and potential criminal liability for user-posted content. Sen. Ron Wyden (D-Ore.) has raised concerns about the legislation, saying it could disproportionately burden startups. But the bill otherwise enjoys strong Senate support. A Senate version ( S. 1693) boasted 67 cosponsors even before the House's bill sailed through that chamber last week, 388-25.

Media mega-merger heads to court: AT&T and the Justice Department are preparing to face off in court over the company's bid for Time Warner, parent company of HBO, CNN and other major media properties. The trial over the $85 billion deal is set to begin March 19. The DOJ sued to block the tie-up in November, citing competitive concerns and potential consumer harms. AT&T has argued that Trump's animus toward CNN improperly spurred DOJ to try to stop the merger. Judge Richard Leon last month denied a request from AT&T for records of White House-DOJ communications on the deal. The company had "fallen far short" of establishing that the DOJ was selectively applying antitrust laws to punish AT&T and Time Warner, Leon said. - Kyle Bennett


Right-to-work: Since their sweeping electoral victories in 2010, Republican state legislators have successfully passed "right-to-work" laws in six states. The policies limit the ability of labor unions to charge non-members fees in exchange for negotiating contracts on their behalf.

Conservatives argue these laws preserve employees' rights by allowing them to work without supporting a union, and that states with right-to-work laws are more attractive to businesses and investors. Critics say these laws cripple unions' ability to function and encourage free-riding by non-members. - Tucker Doherty

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Powell era begins: The Federal Reserve's top policymaking body will meet this month for the first time under Chairman Jerome Powell, who is likely to make his mark right away: The Federal Open Market Committee is expected to raise interest rates when it gathers on March 20-21. Fed officials will also release updated economic projections, offering a hint as to whether the central bank intends to stick with its plan for three rate increases in 2018. Powell and other Fed officials have signaled that more hikes could be on the way if an accelerating economy stirs inflation. But that action could slow down growth, potentially sparking a clash with the president - who's not shy about touting a strong economy.

Rolling back banking regulations: The Senate in early March is expected to pass bipartisan legislation (S. 2155 ) that would relax a range of banking rules put in place after the financial crisis. House Republicans are indicating they don't want to stand in the way of the bill, meaning it could be on Trump's desk in the next few months. If enacted, it would mark the most significant set of changes to federal banking laws since the historic Dodd-Frank reforms in 2010. It would also represent a major legislative victory for the president as well as Republicans and moderate Democrats in Congress, who have been working for years to make the bill a reality.

Rethinking redlining law: The Community Reinvestment Act was enacted decades ago to discourage banks from discriminating against low-income borrowers, particularly minorities -- a practice called redlining. Now, Comptroller of the Currency Joseph Otting is planning to seek input on potential changes to the landmark law, such as offering credit for small-business lending and using simpler metrics to judge banks' performance. While Otting's move is welcomed by some supporters as long overdue in an age when nonbanks and online lenders are proliferating, consumer groups are watching closely to make sure the rules against redlining aren't weakened.

Puerto Rico tries again : Puerto Rico is running up against a new deadline for approval of its latest plan to emerge from a crippling debt crisis and the devastation brought on by two hurricanes. By March 30, the board appointed by Congress to oversee the commonwealth's finances must certify the new fiscal plan. While Puerto Rico's government says it will run a $3.4 billion budget surplus over the next five years, thanks to a promised infusion of U.S. money, it may be headed for a showdown with the board, which has demanded curbs in labor and pension costs. The board's certification is required by the law Congress passed in 2016 to address the U.S. territory's debt crisis. - Mark McQuillan


It's primary time, but is the U.S. ready? The 2018 primary season beginsTuesday in Texas, but Congress has yet to pass legislation designed to bolster the digital defenses protecting the country's election networks. State election leaders and officials at several federal agencies have taken steps since 2016 to replace equipment, hire new IT staffers, redesign cyber training for election staffers and conduct more rigorous scans for digital flaws. But experts and lawmakers warn that the country is still not ready to fight off the digital onslaught from Russian hackers and trolls that intelligence leaders say is already happening.

Cash-strapped states are asking Washington for funds to help upgrade their election technology and voting machines, many of which have been operating beyond their expiration date. But several bills that would establish federal grant programs have gone nowhere. State election officials have also asked for expedited security clearances so they can access better intelligence about the latest Russian hacking tactics. But bills that would streamline this process are stalled, leading to complaints from election officials that they are being kept in the dark about covert Russian interference efforts.

But, but ... The recent bombshell indictment of Russian trolls over interference in the 2016 presidential election may have changed the Capitol Hill landscape. In an attempt to ride the wave of Russia attention, several senators are eyeing new strategies for moving stalled bills. Some are contemplating reintroducing proposals, while others will try to attach their offerings to measures likely to move through Congress, such as the Department of Homeland Security authorization bill - scheduled to receive a markup this week - or the massive spending package Congress must take up this month.

These lawmakers are also likely to get a bump from the report on election system vulnerabilities from the Senate Intelligence Committee, which is expected to land in March or April. The bipartisan document - part of the panel's broader probe into Russia's 2016 election interference and possible collusion with the Trump campaign - will suggest ways for states to patch those flaws, some of which will likely overlap with legislative proposals already on the table.

Changing of the guard: The National Security Agency and U.S. Cyber Command are both poised to get a new leader in the coming weeks, as Lt. Gen. Paul Nakasone appears headed toward an easy confirmation. Nakasone, who currently leads the Army's digital warfighting arm, was tapped for the position in mid-February, several weeks after current NSA and Cyber Command head Adm. Mike Rogers announced he would step down after four years atop the two agencies.

At Nakasone's confirmation hearing last week, lawmakers responded positively to his exhortation that "we must impose costs on our adversaries" in cyberspace. The topic is a point of contention on Capitol Hill, as numerous intelligence leaders, including Rogers, have recently told lawmakers that they believe the Trump administration hasn't responded strongly enough to dissuade Russia from its digital malfeasance targeting the U.S. The Senate Intelligence Committee has said it also will hold a hearing with Nakasone ahead of his confirmation. - Cory Bennett


The annual defense policy march: The House and Senate Armed Services committees are gearing up for a new round of the National Defense Authorization Act. Before marking up their versions of the annual defense policy bill this spring, both panels are now mulling changes to the president's fiscal 2019 defense budget proposal sent to Congress last month.

House Armed Services Chairman Mac Thornberry (R-Texas) has indicated his panel will stick to a recent budget deal that calls for $716 billion in defense spending for fiscal year 2019, beginning Oct. 1. That means lawmakers will face some tough choices in the next few weeks as they set spending levels in the massive defense policy bill.

More money, more problems: As they craft an omnibus spending bill to round out the current fiscal year, appropriators are grappling with how the Pentagon can spend a huge infusion of money with just six months left. Some lawmakers are pushing to give the Pentagon additional spending flexibility into the new fiscal year, particularly for training and maintenance.

Missile defense review on the way: The Pentagon is also poised to release its Ballistic Missile Defense Review, outlining the military's plans for defending the U.S. against missile attacks - a blueprint that will complement the just-released Nuclear Posture Review that called for the development of new types of nuclear weapons. - Connor O'Brien


IRS prepares the small print: Businesses big and small will look to IRS and Treasury Department rule-writers for more clarity on Republicans' tax cuts under the Tax Cuts and Jobs Act (H.R. 1).

The regulatory process is well underway, with some updates already released on taxing carried interest and U.S. companies' foreign earnings, for example. But much work remains, and the process will take months for some provisions and years for others, officials have said. One of the key rules individuals, companies and tax professionals are awaiting will govern the new 20 percent income tax deduction for pass-through businesses. For many businesses,March 15 is the deadline for electing to become an S corporation, a type of pass-through. But Acting IRS Commissioner David Kautter has said the pass-through rules won't be ready until late summer or early fall.

Funding boost? IRS officials asked Congress for $397 million in extra funding over two years to deal directly with interpreting the new law and developing rules, improving the agency's information technology systems, and updating the forms taxpayers have to use.

Republicans on Capitol Hill, who have trimmed the IRS budget by about $1 billion since 2010, are considering the increase as they look to wrap up an omnibus spending deal.

Where's Chuck? Trump's pick to be the next IRS commissioner, tax lawyer Chuck Rettig, could be the subject of more formal vetting by lawmakers this month. The process includes a Senate Finance Committee review of the nominee's financial disclosure paperwork.Rettig hasn't been the subject of much news coverage since Trump nominated him in February, and there doesn't appear to be anything in his past that would pose a confirmation obstacle. However, Democrats may raise concerns about his work on behalf of clients who battled the IRS in court.

Cranking up IRS reform: Congress is developing legislation to improve how the IRS works with taxpayers to settle disputes and resolve other questions more efficiently, in addition to modernizing the IRS in other areas. Lawmakers haven't settled on a vehicle to advance IRS restructuring language, but parts of it could get attached to a spending bill.

Extending the debate: House Ways and Means Committee Republicans have scheduled a hearing March 14 to examine the need for continuing temporary tax provisions through one- and two-year renewals. Many believe the so-called extenders have little utility following the new tax cuts. But the targeted tax breaks have strong defenders on and off Capitol Hill, so fully exorcising them seems like an uphill fight. - Aaron Lorenzo


Parsing the evidence for Monsanto trial: A crucial hearing takes place this week in a widely watched federal civil lawsuit brought by plaintiffs who claim Monsanto's popular Roundup product causes non-Hodgkin's lymphoma. The hearing will focus on which scientific evidence should be used at trial. It's a technical step but one that has huge implications: The judge's ruling could derail or bolster one side or the other.

Farm bill battle: Many farmers, agribusinesses, nutrition experts and others are eagerly awaiting the release of the 2018 farm bill. House Agriculture Chairman Mike Conaway says he is still on track to release his committee's draft of the next farm bill this month and advance it to the full House. There may not be much movement on the House floor, however, until after Congress works out a deal on spending legislation to keep the government open pastMarch 23.

Battle lines are already being drawn. Massachusetts Democrat Jim McGovern, ranking member of the nutrition subcommittee, is encouraging anti-hunger advocates and other nutrition experts to defeat any bill that makes cuts to the Supplemental Nutrition Assistance Program, formerly known as food stamps.

The advocacy groups are fired up after strongly rebuking Trump's proposal to replace a significant portion of SNAP cash benefits with a box of nonperishable foods, dubbed "America's Harvest Box." Conaway said he would consider including money for such a pilot program in the farm bill, as Trump requested in his budget blueprint. - Catherine Boudreau


Washington readies new opioid effort: Months after Trump declared opioids a national public health emergency, the contours of a new effort to combat the deadly epidemic are starting to take shape. The House and Senate this month will start hammering out the details of wide-ranging legislative packages to boost prevention and treatment, and lawmakers have an additional $6 billion to work with over the next two years thanks to February's spending agreement.

The White House is trying to flip the script after facing criticism for so far accomplishing little under the public health emergency and embracing spending cuts that advocates warn could hurt the opioid response. The administration recently called for an additional $13 billion for HHS over the next two years to address opioids, the Justice Department formally endorsed a lawsuit from states and cities against opioid manufacturers and distributors, and the White House held a summit on opioids with top health officials late last week. - Jason Millman


Trump gets stuck in biofuels morass: Trump has invested personal capital in trying to break an impasse between corn and oil interests that have locked horns over the biofuels program. Trump has backed corn interests which view the Renewable Fuel Standard as untouchable. That program requires gasoline to contain a certain percentage of renewable fuels, such as corn-based ethanol. But a persistent push by oil refiners, and the bankruptcy of refiner Philadelphia Energy Solutions last month, put the issue back on his agenda.

At a meeting last week of oil and biofuel executives - along with Sens. Chuck Grassley (R-Iowa), Joni Ernst (R-Iowa), Pat Toomey (R-Pa.), and Ted Cruz (R-Texas) - Trump seemed to back an expansion of ethanol sales in exchange for a cap on biofuel credit costs. Oil refiners have long complained that the high price of those credits was hurting their profits. But the corn state lawmakers and ethanol producers were largely unmoved by Trump's proposal - although the prospect of higher ethanol blends in gasoline could provide an opening for a compromise. Trump is planning to bring the parties back to the White House this week to break the deadlock.

FERC - Laying out grid challenges: Leaders at the Federal Energy Regulatory Commission may have nixed Energy Secretary Rick Perry's controversial proposal to prop up financially ailing coal and nuclear power plants in the Northeast, but they didn't give up altogether on the issue of protecting the electric grid's "resilience." While they rejected Perry's idea of supporting power plants, FERC directed the nation's regional grid operators to detail the biggest natural and manmade threats to their systems by March 9. Grid operators can also address market reforms, a hot topic in many regions. Final comments from anyone else who wants to chime in are due April 8. - Eric Wolff and Darius Dixon


Students push for gun reform: Advocates for tighter control of guns, including many high school students from across the nation, plan to keep pressure on Congress through walkouts and a march planned in D.C. on March 24.

More confirmation votes: The Senate HELP committee plans to voteWednesday on at least two more of Trump's nominees for the Education Department. The panel will vote on the nomination of Frank Brogan to be assistant secretary for elementary and secondary education. Brogan is a former chancellor of two state higher education systems and served as lieutenant governor of Florida under former Gov. Jeb Bush. In addition, the committee will consider the nomination of Mark Schneider to be director of the Institute of Education Sciences, the department's statistics, evaluation and research arm. Schneider previously served as the commissioner of the National Center for Education Statistics during the George W. Bush administration.

Senate moves on Higher Education Act: Sen. Lamar Alexander, chairman of the Senate committee rewriting the federal law governing higher education, has said he wants to mark up a bill this spring. His committee will continue work on the measure this month. Meanwhile, the House GOP version of the reauthorization, which advanced in the education committee, awaits a floor vote.

New campus sexual assault regs? The administration's regulatory plans released late last year said Education Secretary Betsy DeVos planned to propose new Title IX regulations governing campus sexual assault in March. "The secretary plans to issue a notice of proposed rulemaking to clarify schools' obligations in redressing sex discrimination, including complaints of sexual misconduct, and the procedures by which they must do so," the department wrote. - Benjamin Wermund


Do-or-die on FAA reauthorization, infrastructure? March will be a busy month, with Congress moving on a sped-up timetable for a reauthorization of the Federal Aviation Administration and the president's infrastructure plan. House Transportation Chairman Bill Shuster (R-Pa.), who is set to retire next year, wants both on Trump's desk before the August recess. That's ambitious, but Congress can move mountains when the stars align. Here's a thumbnail of the problems that face both bills:

- Who makes first move? With Shuster having dropped his insistence on a controversial proposal to split air traffic control operations from the FAA and into a nonprofit body, the bill can move forward. But so far, neither the House nor the Senate has passed legislation. That means both chambers must pass their respective bills, then reconcile the measures in conference - a tall order even in the best of circumstances. On top of that, Congress will have to enact a short-term patch to keep the FAA running past this month.

-Finding infrastructure funds: Now that the White House has unveiled its principles for an infrastructure plan, attention turns to Congress, which has been tasked with writing the principles into legislation. It remains to be seen how closely lawmakers will hew to the administration's vision. Regardless, money will be a problem. Trump's plan proposes $200 billion in federal dollars, which it would pay for by cutting money from other programs - something Congress is unlikely to do. The chances for this plan hinge almost entirely on where and how lawmakers come up with money, and of course how they propose to spend it. Leading appropriators are working to boost infrastructure spending as part of this month's omnibus, bypassing Trump. - Kathryn A. Wolfe


A different kind of corporate medicine: In the health IT world, anticipation is building about the movement of massive corporations such as Apple, Google, JP Morgan and Amazon into the health care industry. All made big announcements earlier this year. Their activities will be the focus at the Health Information and Management Systems Society annual meeting this week in Las Vegas, with more than 40,000 participants expected.

These well-heeled, tech-savvy companies are seeking solutions to devilish health care problems at a time when the government is taking a low profile. Two of the key problems in the industry are the lack of price transparency and poor data sharing among health care providers. HHS officials are working on a report, due in April, about information blocking, which is illegal under a 2016 law. But they've already said they don't expect to act as police officers (the inspector general will, however, have enforcement powers).

Herding cats? Donald Rucker, whose office oversees national health IT coordination efforts, has put more emphasis on a months-long process he's leading to set up a framework where health care organizations can agree to share information. He and other HHS officials are also focused on lowering burdens on doctors - such as requirements that they record and report data showing they are taking good care of patients - that were created under a 2009 law that offered subsidies to clinicians who could show "meaningful use" of their computer software. - Arthur Allen

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