June Washington D.C. Preview

June 5, 2018

BUDGET & APPROPRIATIONS

A jam-packed June: GOP leaders have sounded the starting gun for fiscal 2019 appropriations bills - though hardly anyone expects all 12 measures to reach the finish line on time, reports Pro Budget and Appropriations' Sarah Ferris.

The House has teed up a vote this week on its first set of spending bills, a remarkable five months before the Sept. 30 deadline. That three-bill bundle,H.R. 5895, includes Energy-Water, Military Construction-VA and Legislative Branch. Those are the least contentious of the 12 annual spending bills, and the so-called minibus (or mini omnibus) is a small fraction of Congress' annual appropriations workload - $138 billion out of about $1.4 trillion. It's expected to pass easily, with just a handful of environmental and nuclear riders that Democrats have opposed. In the Senate, Majority Leader Mitch McConnell has promised to move the minibus quickly. With the midterm elections on the horizon, however, leaders in both parties are privately expecting a stopgap spending bill come September.

Halfway there: Appropriators are pressing ahead with dreams of sending individual bills across the floor. The House Appropriations Committee has already approved half of the 12 bills, aiming to finish the rest by late June. (Homeland Security, which has replaced the expansive Labor-HHS-Education as the appropriations world's hot potato, may take longer.) And the Senate's brand-new appropriations chief has a markup schedule that's just as daunting.The Senate panel has approved two bills, with the remaining 10 slated to be finished before the July 4 break - roughly two and a half markups per week.

Rescissions decisions: For weeks before it was unveiled, Capitol Hill was fixated by the Trump administration's plan to resurface the presidential rescissions tool after two decades. But the White House's idea of a $25 billion rescissions package has turned into a bill targeting $15.3 billion - though it's only expected to produce $1 billion in real cuts. The package, H.R. 3 , could reach the floor this month. It got a boost last week when the White Houserevised its controversial plan to cut unspent Ebola and Hurricane Sandy funding. Also last week, Senate conservatives released their own rescissions package mirroring the White House plan.

 

TRADE

No easing of tensions: The Office of the U.S. Trade Representative is expected by June 15 to publish its final list of about $50 billion worth of Chinese goods that will be hit with a new 25 percent tariff to pressure China to stop the theft of U.S. intellectual property - unless the two nations strike a compromise before then. China, meanwhile, threatens to pull the plug on trade talks if the U.S. goes through with the tariffs.

Around the end of the month, the administration will introduce proposed new restrictions on which technology products can be exported to China and in which sectors Chinese investment will be allowed.

Could be awkward: The president will meet with leaders of Canada, Germany, France, the United Kingdom and Italy June 8-9 in Charlevoix, Quebec, for the annual Group of 7 summit. The gathering comes as Trump has disrupted relationships with some of the U.S.'s closest allies by imposing tariffs on steel and aluminum exports.

Japanese Prime Minister Shinzo Abe - whose country has already been living with the new duties since late March - will come to Washington before also attending the G-7 gathering.

Revving up for more tariffs: The Trump administration recently launched an investigation into whether car imports pose a threat to U.S. national security, setting the stage for Trump to potentially impose tariffs on another major export from allies. The inquiry can take up to 270 days before recommendations are given to the president.

Waiting for détente : NAFTA talks are expected to remain stalled ahead of theJuly 1 Mexican presidential election. The strained relations over tariffs and counter-tariffs are not helping matters. However, a three-year extension of the Trade Promotion Authority, which expedites trade deals in Congress, will automatically kick in on July 1 - unless either the House or the Senate passes a resolution of disapproval, which seems unlikely. - Doug Palmer

 

DATAPOINT

President Donald Trump angered key allies and trading partners with his decision to impose tariffs on steel and aluminum imports. Canada, Mexico and the European Union are likely to bear the brunt of the policy. - Taylor Miller Thomas

Check out the DataPoint graphic here. Want to add DataPoint to your Pro account? Learn more.

 

EMPLOYMENT & IMMIGRATION

DACA drama: House Republicans will pick up a simmering immigration debate when they return to Washington. A group of GOP moderates needs the support of just five more lawmakers to force a vote on four proposals that deal with DREAMers brought to the United States illegally as children. The proposals range in scope from a sweeping hard-line bill from Rep. Bob Goodlatte (R-Va.), H.R. 4760, to the narrower, Democrat-favored DREAM Act,H.R. 3440, which would offer an estimated 1.8 million undocumented immigrants permanent residency. Meanwhile, Senate moderates have quietly reopened immigration talks.

Travel ban ruling: The Supreme Court is expected to rule on the third versionof Trump's travel ban by the end of June. The administration has twice watered down the ban, which caused confusion and distress in airports worldwide when it premiered almost year and a half ago, but it's unclear whether the latest iteration will withstand constitutional scrutiny. The high court appeared split on the policy during oral arguments in late April, with Justice Anthony Kennedy, a frequent swing vote, grappling with both national security concerns and Trump's campaign call for a "total and complete shutdown" of Muslim visitors to the United States.

Only the lonely: U.S. Citizenship and Immigration Services plans to issue a proposed rule this month to roll back work authorization for the spouses of high-skilled H-1B visa holders. Democrats and some Republican members of Congress have urged the administration to reconsider the decision to rescind work permission for the spouses, but USCIS Director Francis Cissna wrote in April that the agency will proceed with the move, citing the mandate of the president's "buy American, hire American" executive order. In an earlier letter, Cissna wrote that the Homeland Security Department "is committed to growing the U.S. economy and creating jobs for U.S. workers." - Ted Hesson

 

AGRICULTURE

House farm bill, round 2: After a failed attempt last month to pass the House farm bill, GOP leadership faces a June 22 deadline to bring the measure, H.R. 2, up for a second vote without changes. Shortly after the vote failed, House Majority Whip Steve Scalise (R-La.) said leadership was planning a June 22redo, after a vote is held on Goodlatte's controversial immigration measure. An unfulfilled demand to vote first on that bill, which would make changes to the H-2A agricultural guest worker program, led conservative House Freedom Caucus members to withhold support for the farm bill, a key factor in its initial demise. No Democrats voted in favor because of the measure's proposed changes to the food stamps program, and some GOP moderates opposed it for the same reason.

But timing for a second farm bill vote is uncertain given GOP divisions over immigration measures. And even if conservatives get a vote on the Goodlatte bill, Freedom Caucus Chairman Mark Meadows (R-N.C.) has said he can't guarantee that would translate into his members voting "yes" on the farm bill. Both supporters and critics have used the time before a second vote to mountintensive lobbying efforts.

Where's the Senate's bill? Across the Capitol, Senate Agriculture ChairmanPat Roberts (R-Kan.) said his chamber's version of the farm bill could be released as early as June 6, with a committee markup the following week. But that may be overly ambitious, since Roberts acknowledged the release timing is a "moving target." He has emphasized that he and ranking member Debbie Stabenow (D-Mich.) will introduce a bipartisan bill that won't include a major overhaul of food stamps, formally known as the Supplemental Nutrition Assistance Program.

In the upper chamber, regional divisions are more likely than partisan politics to stir up controversy. A proposal from Sens. John Thune (R-S.D.) and Sherrod Brown (D-Ohio) is already ruffling feathers because it would likely increase subsidies for Midwestern corn and soybean growers while reducing those for Southern producers of rice, cotton and peanuts.

The current farm bill expires at the end of September. - Catherine Boudreau

 

DEFENSE

The Senate's turn: The Senate is poised to consider its version of the annualNational Defense Authorization Act as early as this week. The Senate Armed Services Committee easily approved the defense policy bill in a closed meeting in May, just before the House passed its version, HR 5515, on the floor.

The $716 billion measure for fiscal year 2019 continues to grow the military, but at a less ambitious pace than sought by the House: The Senate would authorize fewer next-generation fighter jets and ships, as well as lower troop levels, than the House. The Senate proposal also includes a provision that would expand the powers of the Committee on Foreign Investment in the United States, a Treasury department-led panel that reviews takeovers of U.S. companies by foreign buyers for potential national security threats.

Differences between the House and Senate bills will be resolved in a joint House-Senate conference committee after the Senate finishes its bill.

Spending bills pick up steam: June could be a pivotal month for defense spending legislation in both chambers. The Senate Appropriations Committee is slated to take up its defense spending bill the week of June 25, one of the final measures the panel will consider. The House Defense Appropriations Subcommittee is also expected to advance its spending bill this month. -Connor O'Brien

 

TAX

Feds get SALTy with states: States that have devised workarounds for the new $10,000 federal limit on the state and local tax deduction, commonly known as SALT, may find out this month whether the tactics will pass muster with the IRS - and they're likely to be disappointed. The agency and the Treasury Department gave a strong indication of their leaning in a May 23 notice . It said they would propose regulations "in the near future" on state laws that allow people to make purportedly tax-deductible contributions to a state or local charity in lieu of property and income taxes. The notice pointedly stated that "federal law controls the proper characterization of payments for federal income tax purposes" and that the proposed regs "will make clear that the requirements of the Internal Revenue Code, informed by substance-over-form principles, govern the federal income tax treatment of such transfers."

Keep 'em coming: IRS Commissioner David Kautter has indicated that more guidance will be coming on Section 965 under the Tax Cuts and Jobs Act, which governs the repatriation of profits held abroad by U.S. corporations. "We may have a notice coming out in the next couple of weeks, and in addition we will probably have a notice of proposed rulemaking out sometime this summer on [Section] 965," Kautter said at an American Bar Association meeting in May, according to Tax Notes. Meanwhile, Sen. Tim Scott (R-S.C.)said he expects further guidance this month on the tax-advantaged "Opportunity Zones" he championed in the new tax law.

Tax and send: The Supreme Court is expected to rule by the end of the month on the constitutionality of state laws that seek to force online retailers to collect sales taxes from their customers. The case pits South Dakota and other states that say they are losing billions of tax dollars against retailers urging the court to uphold a 1992 ruling that states could only impose the obligation on merchants with a physical presence inside their borders. -Toby Eckert

 

ENERGY

U.S. is a gas: Washington, D.C., will host the World Gas Conference for the first time ever next month, bringing the global industry's glitterati to the country that is both the biggest consumer and producer of the fuel. Senior government officials from China, South Korea, the EU and elsewhere will rub elbows with U.S. Secretary of Energy Rick Perry, Exxon Mobil CEO Darren Woods, Chevron CEO Michael Wirth and dozens of other captains of industry during the week-long confab that starts June 25.

Many industrialized countries are turning to natural gas to replace older coal-burning plants, but questions persist about how to reach new markets - and how to integrate the industry with rising renewable energy sources around the world. And many international players will be interested in whether the U.S. industry will see a second wave of LNG export projects, even though most of the first-wave plants haven't yet come online. - Matt Daily

 

FINANCIAL SERVICES

Rising rates: Federal Reserve policymakers are expected to raise interest rates at their June 13 meeting for the second time this year, but the real news is likely to come afterward at new Chairman Jerome Powell's press conference. Powell has indicated the Fed would be fine with allowing inflation to rise a little bit above its 2 percent target, and he'll face a battery of questions about what that might mean for the future of interest rates.

JOBS Act II: House Financial Services Chairman Jeb Hensarling is vowing to press ahead this month with legislation intended to make it easier for companies to raise money in the capital markets. Hensarling is describing the package as the next iteration of the JOBS Act - the 2012 law that was aimed at spurring more initial public offerings. It may be the powerful chairman's last big legislative initiative before he retires in January.

Deal or no deal? Congress faces a July deadline to extend the National Flood Insurance Program, which protects millions of coastal dwellers from financial ruin. Crunch time for negotiations will come this month, but progress has been slow in the Senate. Talks are underway between lawmakers who are looking for a way to pass a long-term reauthorization with significant changes. Sources close to the discussions expect that Congress will probably have to pass at least one more interim extension before advancing a long-term agreement.

Carson's day in court: The deadline for briefs in the lawsuit filed by fair-housing groups against HUD Secretary Ben Carson is June 26, and the parties could be in court as soon as the end of the month. Fair housing and civil rights groups filed suit in May over HUD's decision to delay an Obama-era rule aimed at curbing housing segregation.

Squeezing the exchanges: The Securities and Exchange Commission is considering a proposal to cap, and possibly ban, rebate fees that stock exchanges pay to traders for buying and selling on their venues. The exchanges are upset because the potential move would undercut a lucrative component of their business: the so-called maker-taker system, in which they pay those who use their sites, while charging other customers who benefit from the increased liquidity. - Mark McQuillan

 

HEALTH CARE

Rx surprise? President Donald Trump says some big drug makers will voluntarily announce "massive" drug price cuts in mid-June. But industry sources say they're unaware of any such announcement - and administration officials aren't providing details.

"We're going to have some of the big drug companies in in two weeks and they're going to announce - because of what we did - they're going to announce voluntary massive drops in prices, so that's great," Trump said. "For the first time ever in this country, there will be a major drop in the cost of prescription drugs."

Trump last month issued a 44-page plan to lower drug prices that included steps like requiring drugmakers to list prices in their advertisements, as well as government-funded pilot programs to explore new ways to hold down the cost of medicines. The president has vowed for more than a year and a half to crack down on drug prices, pledging to take a hard line with pharmaceutical companies.

It's unclear if the administration is pressing individual manufacturers to drop prices, or if it's threatening regulatory action if companies don't comply.

FDA Commissioner Scott Gottlieb has suggested the government reexamine regulations that shield drug rebates from antitrust scrutiny. A safe harbor currently prevents manufacturer rebates to payers from being considered a kickback. Removing it could boost affordability and competition, Gottlieb has said. - Adriel Bettelheim

 

EHEALTH

Using tech to fight addiction: House Republican leaders are planning to bring a sweeping opioid package to the floor this month that includes Rep.Doris Matsui's opioid telehealth legislation, H.R. 5603 (115) , which would expand Medicare reimbursement for telehealth services for substance abuse treatment. The Energy and Commerce Committee advanced thatand a slate of other bills in May. - Mohana Ravindranath

 

TECHNOLOGY

The $85 billion question: June 12 is decision day in the much-watched trial over the Justice Department's quest to block the $85 billion merger between AT&T and Time Warner. Judge Richard Leon's ruling could set a precedent affecting future consolidation in the telecom and media markets at a time when Disney and Comcast are vying for parts of 21st Century Fox. It also has the potential to shape how antitrust enforcers think about competitive threats posed by vertical mergers, in which a company rolls up another that doesn't directly compete with the buyer's core business. Such tie-ups have traditionally attracted less regulatory scrutiny.

No matter the outcome, attorneys and regulators alike will be parsing Leon's rationale and waiting to see if the companies or Justice Department launch an appeal. - Steven Overly

Sunset for net neutrality rules: The Federal Communications Commission's repeal of Obama-era net neutrality regulations will finally go into effect onJune 11. The official sunset of the rules is expected to create scrutiny for internet service providers and for regulators at a Federal Trade Commission newly charged with policing those providers for anticompetitive actions.

The net neutrality rules, adopted in 2015 and rescinded by Republicans this past December, prevented ISPs like AT&T and Comcast from selectively blocking or slowing internet traffic, or creating internet fast lanes for paying web companies. The repeal means ISPs will have to disclose how they manage traffic across their networks, and the FTC can crack down if they deviate from those plans.

ISPs say the repeal will unleash investment in broadband; critics say it will encourage anticompetitive behavior. Expect more lobbying and political fanfare as congressional Democrats seek to rally support in the House for along-shot resolution to undo the repeal, with an eye toward energizing young voters going into the November elections. Senate Democrats scored a 52-47 victory on the measure in May, securing the backing of three Republicans. - John Hendel

 

EDUCATION

Losing their dues?: The Supreme Court could rule any day in Janus v. AFSCME, a closely watched case that challenges the money that public unions collect from nonmembers to cover their share of collective bargaining costs. The ruling could have big ramifications for the finances and political clout of the nation's two main teachers' unions - the National Education Association and the American Federation of Teachers. It's widely expected the ruling will be unfavorable to unions. Already, the NEA has put together a proposed budget that estimates the loss of 300,000 members and a $50 million cut in expenditures over two years.

Civil rights nominee on deck: The Senate reached an agreement in May to debate and vote on Trump's nominee to be the Education Department's top civil rights official - one of the most high-profile positions below Secretary Betsy DeVos. That means 10 hours of debate followed by a vote could come this month on the nomination of Kenneth Marcus, the president of the Louis D. Brandeis Center for Human Rights Under Law. Marcus previously served as the acting assistant secretary of education for civil rights during the George W. Bush administration. The Senate HELP Committee approved Marcus' nomination on a party-line vote in January. If confirmed, Marcus would likely be involved in hot-button issues such as K-12 school discipline guidance and campus sexual assault guidelines under Title IX - issues that are overseen by the department's Office for Civil Rights.

Higher Education Act rewrite? Education watchers are wondering whether the House will take up the reauthorization of the Higher Education Act, the sweeping law that governs federal higher education programs, which was last updated in 2008. The House Education and the Workforce Committee passed a Republican bill by Chairwoman Virginia Foxx (R-N.C.) in December that proponents say would streamline student loan and grant programs. But it's faced backlash from higher education groups concerned about Congressional Budget Office estimates that it would cut mandatory federal spending on student aid by $14.6 billion over the next decade.

The effort appears all but dead in the Senate. Lamar Alexander, (R-Tenn.) the Republican chairman of the Senate HELP Committee, recently said the Senate will not reauthorize the bill this year because "the Democrats won't do it." - Kimberly Hefling

 

CYBERSECURITY

Executive order bears fruit: Washington should begin improving federal networks, strengthening digital weaknesses, and working more with private sector partners on cyber issues, following the president's May 2017 cybersecurity executive order. For instance, Homeland Security Secretary Kirstjen Nielsen says the agency "has outlined how it will prioritize private sector access to tailored intelligence and capabilities in order to mitigate risk where a cybersecurity incident could result in catastrophic effects."

Commerce and DHS are also calling on businesses to play a significant role in training a next-generation cyber workforce. "The private and public sectors need to transform, elevate, and sustain the learning environment to grow a dynamic and diverse cybersecurity workforce," the agencies said in a joint report responding to Trump's cyber EO. The departments advocate for more experiential learning and training opportunities, more avenues to retrain veterans, internships, greater public-private collaboration to build workforce development strategies, and more pathways for cybersecurity careers. All of this is an effort to shrink the cyber workforce gap that some studies estimate will grow to 1.8 million unfilled jobs by 2022.

Battle botnets: In another report responding to the president's cyber executive order, DHS and Commerce have outlined their approach tocombating botnets , those armies of infected computers that can take down websites. The agencies stressed that the tech community and other business partners are key to ridding the internet of such threats, and they argue there aren't enough incentives for companies to prioritize security in internet-connected devices, which often hit the market without adequate - or any - cybersecurity protections. Weak security can mean IoT gadgets, such as baby monitors and web-connected cameras, are susceptible to malware infections. - Mike Farrell

 

TRANSPORTATION

Make or break (or another patch): Floor time for the Senate's FAA reauthorization bill will be hard to come by, with leaders focused on moving appropriations bills. Senate Commerce Chairman John Thune (R-S.D.) has said he hopes to see the bill on the floor before the July Fourth recess, but each day that goes by without an agreement to debate the bill increases the likelihood of a short-term extension. Current FAA law expires Sept. 30.

The next question is whether Congress can clear a bill before year's end. The House passed its version, HR 4, in late April. But even if the Senate can pass its bill, S 1405, before the August recess, that leaves just four months for both chambers to agree on a final version that in some cycles has required years to push through a conference committee. If lawmakers don't act on the FAA bills this year, they'll have to start over in the next Congress. - Kathryn A. Wolfe

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