July Washington DC Preview

QUICK FIX

— Tariff truce: The U.S. and China will resume trade talks after a meeting between President Donald Trump and Chinese President Xi Jinping at the Group of 20 Leaders' Summit in Osaka, Japan. Trump agreed to hold off on raising tariffs on additional Chinese goods, while China agreed to buy U.S. farms products. Trump also said he would loosen his administration's trade ban on Chinese telecommunications giant Huawei. The two sides didn't put a shot clock on negotiations.

— Immigration talks with Mexico press on: The U.S. and Mexico will reach a self-imposed July 15 deadline to demonstrate progress on Mexico's measures to stem the flow of Central American migrants to the U.S. The two sides made a deal on immigration enforcement in early June, but a side agreement — not initially disclosed by either party — said the two countries would circle back in 45 days to gauge progress. If the measures were deemed insufficient by the U.S., the countries would open talks about a "safe third country" or regional asylum deal. Preliminary U.S. border figures obtained by POLITICO showed a decline in arrests over a week-long period in mid-June — but whether the numbers will have fallen enough to satisfy Trump remains to be seen.

— Partisan split on must-pass defense authorization: The House will begin consideration of its annual defense policy bill — and likely hundreds of amendments — when it returns from its Fourth of July recess. Republicans are unlikely to support the new National Defense Authorization Act, H.R. 2500 (116). Defense hawks have slammed it for its lower $733 billion budget topline, limits on low-yield nuclear weapons and loosening of terrorist detainee policy, among other things. Among other contentious proposals, Democrats and Republicans have teed up an amendment to prohibit military action against Iran without congressional approval amid heightened tensions in the Middle East.

TRADE

Clock ticking on USMCA: It will be a race against the clock for the Trump administration and congressional Republicans to try to pass the new USMCA trade deal before the end of the month. After members get back from their July Fourth recess, they'll have only 12 joint-session working days left before Congress takes its five-week summer break.

Democrats have formed USMCA working groups to break down problems they have with the deal as written. Those lawmakers will be working with U.S. Trade Representative Robert Lighthizer to try to reach a compromise on the four major outstanding issues: labor provisions, environmental standards, access to medicines and enforcement.

Lawmakers have said they expect to meet with Lighthizer at least weekly. The Trump administration could send its implementing legislation to Capitol Hill to try to force the issue, but it will be up to House Speaker Nancy Pelosi to decide when to take up a vote. Pelosi said last week that Democrats could opt to demand the pact be reopened to address enforcement concerns.

Tariff tension: Companies hoping to get exclusions from duties on $200 billion in Chinese imports that Trump hiked from 10 percent to 25 percent in May could find out this month whether their requests were granted. — Megan Cassella

BUDGET & APPROPRIATIONS

Race to avert shutdown: Congress has just three months left to finish up fiscal 2020 funding bills before money runs dry on Oct. 1. And no matter how quickly spending leaders are able to tick through the 12 annual funding measures, none of that action will matter if a broader budget deal doesn't get done.

Once lawmakers return from recess on July 9, those talks could continue with top White House officials. But leaders on both sides of the aisle are already preparing for the likelihood of another stopgap spending bill that drags out current funding levels, especially since Trump's top fiscal advisers just floated that idea in their most recent meeting on the issue.

Without an agreement on overall caps for defense and non-defense spending, Senate appropriators could follow the lead of their House counterparts in starting to pick tentative limits this month so they can start the process of writing fiscal 2020 bills.

On the House side, the chamber passed 10 of its 12 annual spending bills in June, leaving only the Legislative Branch, H.R. 2779 (116), and Homeland Security measures untouched. It is unclear, however, whether House Democrats will want to wade this month into the contentious issues that snagged those bills last month or whether they will hold off on passage until after a budget deal is struck. — Jennifer Scholtes

EMPLOYMENT & IMMIGRATION

Asylum changes coming: The end of July will bring a deadline for the Department of Homeland Security secretary and attorney general to show they've taken steps to implement a number of policies to toughen the asylum process. Trump issued a memo in April that gave the departments 90 days, until July 29, to "take all appropriate actions" to adopt several asylum policies, including adding a fee to asylum applications. — Ted Hesson

FINANCIAL SERVICES

Powell's month in the spotlight: July will be packed with events for the Federal Reserve, with Chairman Jerome Powell scheduled to face Congress for his semiannual testimony and Fed policymakers meeting to decide whether to cut interest rates. When Powell goes before the House Financial Services Committee on July 10 and the Senate Banking Committee the next day, he'll be grilled by lawmakers over the central bank's rate plans as well as the increasingly aggressive criticism he's getting from the president. Trump has been haranguing Powell for months to slash rates, an unprecedented display of public pressure on the central bank. Policymakers meet on July 30-31 to determine whether economic conditions are weakening enough to warrant lower rates as insurance against a more rapid economic slowdown.

Facebook returns to Congress: The social media giant will be the subject of back-to-back Senate Banking and House Financial Services hearings on July 16 and 17 focused on its "Libra" digital currency project announced last month. House Financial Services Chairwoman Maxine Waters has called on the company to halt its foray into finance until policymakers can vet the project. The Facebook executive overseeing Libra is expected to testify.

Bank merger review: Waters will lead another hearing July 24 on the proposed merger of lenders BB&T and SunTrust. The California lawmaker and other Democrats have been critical of the deal, which would create the nation's sixth-largest retail bank, and Waters has asked regulators to hold off on approving it until her committee has had a chance to review it.

Next steps on housing finance overhaul: Treasury is expected to release a highly anticipated plan to overhaul the nation's housing finance system any day now. Trump in March directed the department to come up with a proposal to end more than a decade of government control of Fannie Mae and Freddie Mac, the companies that back about half the country's mortgages. Federal Housing Finance Agency Director Mark Calabria, the regulator who oversees Fannie and Freddie, says he expects to engage with Treasury on the way the companies will operate in the future once the report is unveiled. Congress will have a say, too. — Mark McQuillan

HEALTHCARE

Obamacare on the line: A federal appeals court next week will consider Obamacare's fate months after a judge in Texas ruled the entire law unconstitutional, a decision that shocked Washington and the health care industry. A group of Republican-led states, with full support from the Trump administration, contend the nearly decade-old law was invalidated after Congress eliminated the penalty for not having health coverage. Democrat-led states and the House of Representatives are defending the law in a case that could reach the Supreme Court next term, at the height of the 2020 election. But first, the 5th U.S. Circuit Court of Appeals will hear oral arguments in the case, Texas v. Azar, on July 9 in New Orleans. — Jason Millman

DEFENSE

Defense nominees on deck: The Senate Armed Services Committee could hold a confirmation hearing this month for Mark Esper to be permanent Defense secretary, just weeks after Trump's last choice, Pat Shanahan, pulled out.

No date has yet been set for a hearing. But asked when he'd like to see Esper confirmed, Senate Armed Services Chairman Jim Inhofe (R-Okla.) responded tersely: "Yesterday."

Esper took over as acting Pentagon chief after Shanahan withdrew from consideration and resigned from the Pentagon amid questions about ties to former employer Boeing, his qualifications for the job and a troubled family history.

Esper will likely face pointed questions about his independence from the White House and his ties to Raytheon, where he was a top lobbyist.

In addition to Esper, Trump has also tapped Pentagon Comptroller David Norquist to become deputy Defense secretary and Army Undersecretary Ryan McCarthy to replace Esper as the service's top civilian leader. — Connor O'Brien

AGRICULTURE

Details on trade aid 2.0: Farmers are anticipating an announcement from the Agriculture Department outlining specifics of the administration's second round of assistance for producers hurt by retaliatory tariffs. The latest iteration of the trade relief program, which carries an expected price tag of $16 billion, has been under review by the Office of Management of Budget since mid-June. The bulk of the assistance will consist of direct payments to farmers, but the program will also include USDA purchases of surplus commodities and promotion of U.S. goods in new export markets.

The first wave of payments under the new program could begin as early as the end of the month. USDA has said direct payments could be made in up to three rounds, running through the fall.

Relocation deadline: Employees at the Economic Research Service and National Institute of Food and Agriculture whose jobs are being relocated to a new Kansas City-area headquarters have until July 15 to notify the department whether they intend to move. Agriculture Sonny Perdue has touted the relocation plan as a way to bring researchers closer to farming communities, as well as cut costs and improve staff recruitment and retention. But many employees are frustrated by the decision. Union leaders estimate that a significant amount of staff may quit — as many as four out of five employees at ERS, for example. — Liz Crampton

EDUCATION

Still waiting: Senate education leaders Lamar Alexander (R-Tenn.) and Patty Murray (D-Wash.) are still negotiating a rewrite of federal higher education law, missing Alexander's self-imposed May deadline to release a draft. The House education committee, meanwhile, has wrapped up its series of bipartisan hearings on the Higher Education Act, so we're watching to see what legislation Democrats on the committee produce.

Union courting: 2020 hopefuls continue to woo the nation's teachers unions, first at the National Education Association's forum on education in Houston on July 5. The American Federation of Teachers, meanwhile, continues to hold town hall meetings with candidates as the union weighs whom to support. — Benjamin Wermund

CANADA

Feud with China deepens: Prime Minister Justin Trudeau has a China problem on his hands ahead of the Oct. 21 Canadian federal election. China last week said it would block all shipmentsof Canadian meat, a move that escalated a diplomatic dispute between the two nations that began in December with Canada's arrest of a Huawei executive at the request of the U.S. China has also restricted imports of Canadian canola and prosecuted two Canadians on espionage charges that Trudeau has called "arbitrary."

The freeze-out: The diplomatic impasse with China could have election year ramifications for Trudeau for reasons that go beyond economic hits. High-level Canadian officials have been rebuffed in efforts to meet with their Chinese counterparts to broker a solution. That has forced Trudeau to lean on Trump for assistance, but the G-20 meeting over the weekend ended without any resolution for Canada.

A summer cameo for Parliament? Canada's Parliament adjourned late last month ahead of the election and is not scheduled to return until well after Canadian voters head to the polls. But the new North American trade deal could lure lawmakers back to Ottawa for a special session. Canada's bill to implement the USCMA is expected to pass easily, but the Trudeau government held off on setting up a final vote to see if the Trump administration can reach an agreement to satisfy House Democrats' concerns with the NAFTA replacement.

If Trump lands a deal before Congress' August recess, Trudeau will recall Parliament for an emergency summer session to pass the USMCA bill, a Canadian official told POLITICO. If not, the Canadian Parliament is unlikely to take up USMCA again until 2020. — Alex Panetta

TECHNOLOGY

T-Mobile-Sprint merger nears end game: Federal regulators' review of the $26 billion merger between T-Mobile and Sprint appears to finally be entering its end stages. Justice Department antitrust officials have been negotiating with the companies on spinning off assets to seed a new nationwide wireless carrier so that the combination of T-Mobile and Sprint doesn't reduce overall competition in the mobile market. DISH has been in talks with the companies on being the party to pick up those divested assets and launch a wireless network, a person familiar with the matter has told POLITICO.

Even so, the deal and its review remain rife with uncertainty. For one thing, DISH has a history of false starts and unmet promises toward building a wireless network — a factor that could rankle FCC Chairman Ajit Pai, whose agency also have to sign off on a side deal with DISH alongside DOJ. Also, as T-Mobile and Sprint are separately facing bids to block their deal in court from more than a dozen Democratic state attorneys general, it's unclear if an arrangement like the one that's been discussed would allay the AGs' concerns that the wireless mega-merger would hike consumer prices and kill jobs. — Kyle Daly

TRANSPORTATION

Not quite dead yet: Infrastructure talks — abandoned for dead after a meeting between congressional Democrats and Trump blew up in spectacular fashion — might be resurrected.

In late June, House Transportation Chairman Peter DeFazio (D-Ore.) said he, Pelosi and House Ways and Means Chairman Richard Neal (D-Mass.) were looking to restart talks on their $2 trillion infrastructure dream now that acting White House Chief of Staff Mick Mulvaney's influence may be waning with Trump. Mulvaney had opposed the infrastructure plan.

Elsewhere, the Senate Environment and Public Works Committee is still signaling that it wants to move a surface transportation reauthorization bill out of committee before the August recess. — Kathryn Wolfe

TAX

Treaties could get a vote: There's a glimmer of hope among some business advocates for long-awaited Senate approval of four tax treaties between the U.S. and Spain, Switzerland, Japan and Luxembourg. They recently cleared a Senate committee — which they've done several times in the past — only to stall on the floor due to opposition from Sen. Rand Paul (R-Ky.). Advocates — who say the treaties prevent double taxation — expect Senate Majority Leader Mitch McConnell(R-Ky.) to commit some floor time to them, circumventing Paul's holds that date to 2011.

Off to court they go? Ways and Means Chairman Richard Neal (D-Mass.) might file a lawsuit this month to get Trump's tax returns. The administration in May refused to comply with a subpoena for the records, and liberals are prodding Neal to get moving. But the issue appears to be in the hands of a group of five party leaders known as the Bipartisan Legal Advisory Group, after the House cleared the way for the group to authorize lawsuits in lieu of a vote by the entire House.

Un-sticking a retirement bill: Supporters are pressing for Senate action on House-passed legislation, H.R. 1994 (116), to boost retirement savings, in part through tax-advantaged retirement plans. A few senators have blocked the bill, and some pensions could fall short of commitments to beneficiaries if the impasse drags deep into the year. The legislation also would repeal an inadvertent tax increase on some survivor benefits that go to the children of military personnel killed on duty.

Extenders update: Talks to revive extenders — a host of lapsed tax benefits and others that are due to expire at the end of this year — are ongoing. The Senate has pushed for a two-year renewal for those that have already expired, without covering the cost to do so. But the House Ways and Means Committee has approved a more complicated package, H.R. 3301 (116), to renew two years of expired extenders and continue several that would sunset at the end of this year, with pay-fors. They also approved expansions of several popular personal tax credits in a separate bill, H.R. 3300 (116). Neither has reached the House floor for a vote. — Aaron Lorenzo

CYBERSECURITY

Don't get wiped: Amid increasing cyberspace tensions between the U.S. and Iran, DHS issued a stark warning for industry: Shore up your digital defenses, and do it now.

In a statement late last month, as warnings emerged of growing Iranian digital attacks on American businesses and reports of a U.S. cyberattack on an Iranian weapons systems, DHS said industry should be on alert for "wiper" attacks. Those types of attack are designed to infect a target's systems and destroy data stored on hard drives.

Cybersecurity experts are increasingly worried that tensions with Iran — especially following the reported U.S. cyberattack in retaliation to Iran downing an American spy drone — will result in more punishing attacks on U.S. critical infrastructure. Experts are also worried about an uptick in attacks from Moscow, following news that U.S. Cyber Command carried out cyberattacks on the Russian power grid. — Michael B. Farrell

ENERGY

Biofuels deadline looms: The White House recently kept its promise to farmers to allow year-round sales of the E15 ethanol-gasoline blends, but it may now have trouble meeting its deadline to set the annual requirement for biofuel blending requirements under the Renewable Fuel Standard. The proposed annual rule and another rule, which would set a new blending schedule for the next three years, are both at OMB for review, but the process was thrown into chaos when the president ordered EPA and the Department of Agriculture to make substantive changes to the program. Iowa farmers complained to Trump during his recent trip to the corn belt that the dozens of waivers EPA had granted to refiners exempting them from the biofuel mandates were still hurting ethanol markets, so Trump ordered his administration to fix the issue.

In the meantime, oil refiners, who believe the exemptions are legally required, and ethanol backers are whipping up their supporters in Congress to help out. EPA has yet to issue its blending requirements' proposal, which must finalized in November — and it will have to do it without Bill Wehrum, the agency's air chief who exited in June and who had been overseeing the process. — Eric Wolff

House to take up PFAS in defense bill: Lawmakers are hoping to attach a slew of amendments tackling toxic PFAS contamination to the House's annual defense policy bill once they return from the July Fourth recess. The Rules panel is expected to wade through hundreds of proposed tweaks to its fiscal 2020 National Defense Authorization Act, including several that echo PFAS provisions included in the Senate's NDAA bill, S. 1790 (116).

One amendment to watch, from Michigan Rep. Debbie Dingell, would require EPA to list PFAS chemicals as hazardous substances under Superfund within one year — a top priority for many communities that sought that measure to force the entities responsible for the contamination to pay for clean-ups. A similar amendment from Senate Environment and Public Works ranking member Tom Carper (D-Del.) was not included in the Senate's defense bill. — Kelsey Tamborrino

EHEALTH

Health bills gain approval: Health IT policy wonks will want to keep their eyes on two big legislative packages in July that recently moved to the House and Senate floors.

The Lower Health Care Costs Act of 2019, S.1895, which the Senate HELP committee approved on June 26 , contains a number of health IT elements, including transparency requirements in Title III that involve IT upgrades, grants to public health departments to improve data systems and their interoperability in Title IV as well as an entire Title V section dedicated to improving health information exchange. The latter requires commercial health insurers to make information available to patients through application programming interfaces, incentivizes cybersecurity upgrades in health care and authorizes an inquiry into how to protect the privacy of health data that's currently not covered by HIPAA.

The House's BETTER Act, H.R. 3417, a large package of bills aimed at improving health care for seniors that the Ways and Means Committee approved June 26, would expand access to mental health services through telemedicine for Medicare beneficiaries, including in the home — enabling use of the technology well beyond its current limits to certain geographic regions with provider shortages. — Arthur Allen

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