August Washington D.C. Preview

QUICK FIX

— Appropriators prep over recess: Senate spending leaders are hoping to do as much work as possible during the August recess to make sure they can "hit the ground running" on funding the government before the Sept. 30 deadline, Senate Appropriations Chairman Richard Shelby (R-Ala.) says. All 12 of the Senate's spending subcommittees will be getting their fiscal 2020 topline allowances, in effect, as Shelby hands down those so-called 302(b) allocations this month. In the House, appropriators are under less pressure to spend the district work period staking out funding priorities, since they already marked up all of their fiscal 2020 bills and passed 10 on the floor this summer. Those measures will need some revamping, however, to reflect about $5 billion more that the budget deal, H.R. 3877, allows for the military and about $15 billion less for non-defense spending.

— Late-summer USMCA push: The administration will work throughout August to reach a deal with House Democrats to pass the U.S.-Mexico-Canada Agreement. Lawmakers appointed by Speaker Nancy Pelosi to lead negotiations said they sent the administration detailed proposals for changing the pact's provisions on labor, environment, pharmaceuticals and enforcement. Staff-level work during the recess is expected to focus on drafting legal language addressing those concerns.

— Housing finance overhaul: Treasury is expected to release its highly anticipated plan to overhaul the nation's housing finance system this month. President Donald 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 behind about half of 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.

TRADE

On the China front: August could see movement on Washington's treatment of Chinese telecom giant Huawei. The Commerce Department has until Aug. 19 to renew a temporary waiver that allowed U.S. companies to engage in certain transactions with the blacklisted company. It's unclear how relations between Washington and Beijing will be affected by Trump's threat last week to impose new tariffs on about $300 billion in Chinese goods starting Sept. 1.

Seeking a "mini" deal: U.S. and Japanese officials will continue negotiating a limited trade deal. U.S. Trade Representative Robert Lighthizer met with Japanese Economic Revitalization Minister Toshimitsu Motegi on Aug. 1, and the two officials are expected to meet again later this month. Trump and Japanese Prime Minister Shinzo Abe will meet face-to-face at the G-7 meeting in Biarritz, France, on Aug. 24-26, and again in September at the United Nations. — Adam Behsudi

AGRICULTURE

Trade aid 2.0: The first round of payments in the Trump administration's second trade relief package for farmers battered by retaliatory tariffs will roll out across the heartland later this month. Direct payments will make up about $14.5 billion of the program's $16 billion price tag, with another $1.4 billion to be used toward purchases of commodities like pork, poultry and citrus, which will be used to supplement nutrition programs.

Direct payments are expected to be doled out in three waves: The first will come later this month, with the next two installments following in November and January if necessary, depending on the status of trade negotiations, USDA officials said late last month. Farmers will have until Dec. 6 to sign up for the aid program. — Helena Bottemiller Evich

HEALTH CARE

Major bills in limbo: Congress left for recess without finishing work on significant drug price and surprise medical bill legislation, giving K Street and lawmakers more than a month to shape the efforts behind the scenes. Key House and Senate committees have already approved legislation ( H.R. 2328/S. 1895) banning patients from receiving large bills when they unexpectedly get treatment from out-of-network providers, but the legislation could still be changed before floor votes. And before recess, the Senate Finance Committee approved bipartisan drug price legislation supported by the White House. However, many Republicans view the legislation skeptically because it would empower Medicare to cap some drug price hikes. — Jason Millman

DATAPOINT

Carbon tax momentum: Legislators from both parties are introducing bills in the House and Senate that would mandate carbon taxes to reduce carbon emissions. The three bills would use the revenues primarily for distribution to low- and middle-income Americans, with the remainder targeted for clean energy research, development and investment. — Patterson Clark

ENERGY

On her way out: FERC Commissioner Cheryl LaFleur will step down from her post at the end of August, bringing an end the Democrat's nine-year tenure on the energy regulatory commission, including two stints as chairperson. LaFleur's departure will give Republicans on the panel a majority for the first time since last August, when former GOP Commissioner Robert Powelson retired early. That could help them deliver on Trump administration priorities, such as natural gas infrastructure and supporting coal and nuclear plants, as well as resolve a yearlong impasse over market rules in the mid-Atlantic PJM region. LaFleur's tenure ranks as the third-longest of any FERC regulator and her departure will mean the commission loses meaningful energy industry experience. None of the other regulators, including Chairman Neil Chatterjee, have served for more than two years, or were appointed by a president other than Trump. — Gavin Bade

TRANSPORTATION

Working through recess: The Senate took the first step toward putting together a multiyear surface transportation reauthorization, with the Environment and Public Works Committee approving a $287 billion measure as July drew to a close. But its path to enactment will be a long one, in part because the deadline to act won't come until next September. Regardless, other committees that share jurisdiction over the bill will spend August deliberating — chief among them the Finance Committee, which will contribute the all-important funding title. One thing senators agree on: The money won't come from a gas tax hike. Sen. John Barrasso (R-Wyo.), who chairs EPW, has said Senate Majority Leader Mitch McConnell (R-Ky.) is open to potentially allocating floor time for the bill this fall. — Kathryn A. Wolfe

EMPLOYMENT & IMMIGRATION

Visa overstay recommendations: Acting DHS Secretary Kevin McAleenan and Secretary of State Mike Pompeo face an Aug. 20 deadline to provide Trump with recommendations to reduce overstays by visitors on tourist and business visas. The president issued a memo in April that called for the departments to engage with foreign governments whose nationals had an overstay rate of over 10 percent for those visa categories. African nations make up roughly half of the countries on the list (which is based on the rate of overstay, not the total number of people who don't leave). Trump's memo called for suggestions to combat overstays, including possible travel bans against people from those nations.

Oral arguments in TPS appeal: The 9th Circuit Court of Appeals will hear oral arguments Aug. 14 in Pasadena over Trump's decision to phase out Temporary Protected Status for more than 327,000 people from El Salvador, Haiti, Nicaragua and Sudan. The status allows foreigners to remain in the U.S. and work legally if their home countries experience an armed conflict, natural disaster or other extraordinary events. Trump has moved to terminate most TPS enrollment, but a San Francisco-based federal judge last year temporarily blocked him from doing so for those four countries. The administration is appealing the ruling. DHS announced in March that it would pause efforts to terminate the status for another 100,000 people from Honduras and Nepal pending the outcome of the litigation. The 9th Circuit has ruled against a number of Trump immigration policies. — Ted Hesson

FINANCIAL SERVICES

Fed clashes with banks: The Federal Reserve is poised to announce that it's going to build its own infrastructure to facilitate faster payments, a system that would revolutionize financial services by allowing people to receive money in their accounts within seconds after it's sent to them. But the Fed's system would be competing with a billion-dollar version already built by large U.S. banks. The banks say such a move would delay the goal of real-time payments that can reach everyone, and they are gearing up for battle with the Fed.

Taking it to court: Lawyers for Trump and House Democrats will face off in court on Aug. 23 as the president tries to block congressional subpoenas for his financial records from Deutsche Bank and Capital One. Trump and his family are appealing a district court decision that allowed the House Financial Services and House Intelligence committees to move forward with the subpoenas. The new case is being argued before the 2nd U.S. Circuit Court of Appeals in New York. — Mark McQuillan

TAX

Legal jockeying: Suits and countersuits over attempts by Democrats to obtain Trump's tax returns could heat up this month.

In one of the cases, a D.C.-based federal judge will consider New York's bid to move the case to that state. At issue is a recently enacted New York law that allows congressional Democrats to obtain Trump's state tax returns upon request. Trump has sued to stop House Ways and Means Chairman Richard Neal (D-Mass.) from requesting them, even though Neal has made no move to do so. D.C. District Judge Carl Nichols in late July asked lawyers for Trump, the committee and New York to try to agree on how to move forward with the case. When that failed, he agreed to hear New York's argument for a venue change. It could take several weeks to decide the matter.

Separate hearings could also be scheduled in another case, in which Neal is suing the administration for six years of Trump's personal returns and some of his business returns over the same period. So far, that case, which is also being argued in the D.C. district court, has been quiet.

Lastly, there's California, which recently enacted a law that would effectively bar Trump from appearing on the state's primary ballot unless he disclosed his tax returns. Trump attorney Jay Sekulow has said that case too "will be answered in court," so look for a filing sometime this month.

Digital tax threats: Trump could hit back against a new French tax on revenue from digital services such as online advertising, which will largely hit major U.S. tech companies like Google and Apple. On Twitter, Trump threatened "a substantial reciprocal action." U.S. trade officials are already investigating the tax as an unfair trade practice, with a hearing set for Aug. 19.

Bitcoin buyers beware: The IRS could soon update five-year-old guidance on taxing income from virtual currency trades. Some 10,000 people who may have underpaid taxes on their cryptocurrency transactions are expected to receive warning letters from the agency this month, and IRS Commissioner Chuck Rettig has been saying the IRS is increasingly relying on data analytics to track the matter. Additional legal guidance is expected in the near future, according to the agency, which recommended virtual currency traders amend past returns and pay back taxes, interest and penalties if they've underpaid to date. — Aaron Lorenzo

DEFENSE

Rush to the finish: Leaders of the House and Senate Armed Services committees will have to wait until after the long August congressional recess to formally begin their negotiations on a final version of the annual National Defense Authorization Act (H.R. 2500/S. 1790 ). In the meantime, discussions at the staff level will likely take place through the month. Lawmakers are aiming to pass a defense bill by the start of the 2020 fiscal year on Oct. 1. But to hit their mark, they'll have to overcome major differences on funding, Iran and military assistance along the U.S.-Mexico border, among other issues. The talks, though, will be significantly aided by a budget deal that sets overall defense spending for the new fiscal year at $738 billion.

Top Pentagon ranks fill out: After months of uncertainty, the Pentagon's top leadership rungs are beginning to fill out. Defense Secretary Mark Esper's confirmation ended the longest vacancy of a permanent secretary in Pentagon history. And just before its August recess, the Senate also confirmed David Norquist to be Esper's deputy, a position he'd held on an acting basis, and Vice Adm. Michael Gilday to be the new chief of naval operations. Earlier, Army Gen. Mark Milley was confirmed as the new chairman of the Joint Chiefs of Staff. — Connor O'Brien

CANADA

Pharma fears: The Canadian government is grappling with how to respond to sudden U.S. momentum toward importing prescription drugs from Canada. In an effort to lower prices in the U.S., the Trump administration has proposed two potential pathways for importing medicine and is also said to be favorably disposed toward similar initiatives at the state level. Four U.S. states have passed importation bills, but the administration has yet to provide necessary federal signoff.

The Canadian medical sector has warned that the country — which already experiences occasional drug shortages — could face a supply crisis if the much larger U.S. market draws on Canadian production. The Trudeau government has been measured in its response, releasing statements pledging to protect the nation's drug supply. Canadian health care groups are urgingstronger and more vocal action. — Alexander Panetta

EDUCATION

Higher ed "rethink" on track: The Trump administration's efforts to overhaul a wide range of federal rules governing higher education will likely see more action in the coming months. A federal rulemaking panel reached consensus earlier this year on draft regulations as part of Education Secretary Betsy DeVos' plan to "rethink" postsecondary education. Education Department officials are finalizing those regulations.

First up is a package of rules to ease federal requirements on college accreditors and make it easier for colleges to keep and maintain their accreditation in some cases. The Trump administration argues the rules are important to promote greater innovation in higher education, but some Democrats and consumer groups worry they will harm federal guardrails for quality control.

Other proposed regulations, which will be released for public comment in the coming months, include scrapping the federal definition of the credit hour, expanding protections for religious schools and boosting federal aid to competency-based education programs. The proposals are under review by the White House Office of Management and Budget. — Michael Stratford

TECHNOLOGY

Key stretch for Senate privacy negotiations: The halting congressional efforts to craft a federal privacy bill to protect consumer data are now hinging largely on two people: Senate Commerce Chairman Roger Wicker (R-Miss.) and his panel's top Democrat, Sen. Maria Cantwell (D-Wash.). The two are engaged in one-on-one negotiations over a potential measure after Cantwell pulled back from a committee working group that included other senators. Wicker said he'd like to have bill text before Labor Day — ahead of lawmakers' return from the August recess. But some of the early signs don't look particularly encouraging; Wicker told reporters that a Democrat-backed provision allowing individuals to sue companies over privacy violations — the so-called private right of action — is a "total non-starter." Meanwhile in the House, Democrats are blazing ahead with their own ambitious privacy proposals that could be hard to square with anything coming out of the GOP-controlled Senate. — Eric Engleman

CYBERSECURITY

Amazon woes: Amazon is facing new scrutiny over its bid for the Pentagon's $10 billion cloud computing contract. Trump said the company's proposal for the Joint Enterprise Defense Infrastructure program, known as JEDI, needed a hard look. And now lawmakers want answers about Amazon's role in the Capital One hack, which exposed sensitive information from about 100 million credit card applications. It doesn't appear that the Capital One data breach resulted from a security loophole in Amazon Web Services. The alleged hacker in this case once worked for AWS, but it's still unknown if she used any special knowledge of the company's cloud services to infiltrate the bank.

Late last month, House Oversight Committee Republicans requested details on the bank's response to the breach and to explore the ramifications for the future of AWS government work. — Michael B. Farrell

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