March Policy Issues Preview

QUICK FIX

— Race to a mini trade deal with the EU: The U.S. and EU face a self-imposed deadline of March 18 to strike a truce in a transatlantic trade war. The Trump administration has put off until that date a tariff hike on European planes in a long-running dispute over European subsidies for Airbus. EU trade chief Phil Hogan, who will be in Washington that week ahead of the deadline, has said he wants to reach a mini trade deal with the U.S. before then. European officials expect a deal could involve the EU offering concessions on some farm goods and conformity and industrial standards, while the EU wants to see the U.S. drop tariffs on EU farm exports and commit that it won't impose tariffs on car imports.

— Super Tuesday: Six candidates remain in the Democratic presidential field, and the states that vote Tuesday could further winnow the numbers. Read up on where they stand on key policy issues.

BUDGET & APPROPRIATIONS

Spending season begins: A new spending season kicks off this month as dozens of agency officials and Cabinet secretaries march to Capitol Hill to testify on their funding needs for fiscal 2021, now just seven months away.

In theory, funding the government should be easier this time since spending caps have already been signed into law, limiting military funding to $740.5 billion and non-defense funding to $634.5 billion. But the budget request President Donald Trump sent to Congress in mid-February undercuts the non-defense cap by billions of dollars — a reduction lawmakers will never oblige. So appropriators will spend the spring trying to parse together a more realistic Trump administration wish list that falls within the caps the president signed into law, H.R. 3877 (116), last summer.

Senate Majority Leader Mitch McConnell said in February that his chamber will get to work crafting fiscal 2021 funding bills that abide by the set spending limits. And House leaders have set another midsummer goal for floor passage of their own spending measures. But election-year politics complicate the endgame for funding the government by the Oct. 1 deadline, increasing the likelihood of a stopgap that keeps federal cash flowing at current levels beyond the electoral reckoning to come on Nov. 3. — Jennifer Scholtes

Defense budget fault lines: Pentagon brass have begun making the rounds on Capitol Hill to pitch the administration's fiscal 2021 defense budget — and they're already getting an earful about the parts lawmakers don't like. Those disagreements will be amplified as more officials from the military services testify this month before the House and Senate Armed Services and Appropriations committees.

Lawmakers have indicated their opposition to some major cost-saving provisions that Pentagon leaders say were needed as defense spending flattens. That includes a Navy proposal to build fewer ships and an Air Force gambit to retire dozens of bombers and tankers.

Border wall: The Pentagon is also weighed down by its diversion of an extra $3.8 billion from fighter jets, shipbuilding programs and equipment toward a border wall. Lawmakers in both parties oppose the move, which they contend undermines the military's case for continued budget increases. — Connor O'Brien

ENERGY

Senate takes up energy bill: A bipartisan energy bill hits the Senate floor this month in the latest attempt to update the nation's energy laws after more than a decade of inaction in Congress. The bill from Sens. Lisa Murkowski and Joe Manchin, the top Republican and Democrat on the Energy and Natural Resources Committee, takes some modest steps to promote renewable energy, efficiency, carbon capture and other technologies, but it avoids setting any limits on greenhouse gas emissions or mandating the use of carbon-free energy. A similar bill passed the Senate four years ago, but it never became law after the failure of conference committee negotiations with the then-Republican-controlled House. It remains to be seen whether the chances of success are any better this time around, amid election-year politics and House Democrats' desire to be more aggressive on climate change. — Nick Juliano

CORONAVIRUS EFFECTS

U.S. officials brace for drug, device shortages from coronavirus outbreak: U.S. officials are bracing for possible drug and medical device shortages if the coronavirus outbreak worsens in China, a significant player in global drug production.

While no shortages have been reported so far, the FDA has identified about 20 drug products that are either solely manufactured in China or contain an active pharmaceutical ingredient solely made in China. The accounting is part of the agency's effort to track how the outbreak could affect the U.S. drug supply chain.

The agency is also contacting the more than 180 manufacturers of U.S.-approved drug products that are made in China to remind them of their requirement to notify FDA of anticipated supply disruptions.

HHS Secretary Alex Azar told Congress last week that it is a challenge to monitor supply chains for medical devices because manufacturers are not required to report potential shortages the way that drugmakers are. Current rules require drug companies to notify FDA six months before a product discontinuation or manufacturing interruption. If that is not possible, notification must come as soon as practicable — and no less than five business days before a product is discontinued or manufacturing is interrupted.

China provides the raw material used in 13 percent of U.S. drugs, and together with India accounts for 40 percent of factories manufacturing drug ingredients and finished medicines for U.S. patients. — Sarah Karlin-Smith

Rate expectations: The Federal Reserve's policymaking committee will meet on March 17-18 amid growing investor expectations that the central bank will cut interest rates to head off the economic harm from the virus' spread. Fed officials have said it's too soon to tell whether the U.S. fallout will be large enough to require slashing rates, but the pressure is mounting, with even former Fed Governor Kevin Warsh calling on the bank to act soon. Economists point out that some of the economic pain will come from events — like Chinese factory closures — that lower rates can't do much to combat. — Mark McQuillan

Energy conference canceled: The coronavirus has also forced the cancellation of one of the world's largest energy conferences: The annual weeklong CERAWeek gathering, which had been planned to begin March 9 in Houston. That's in addition to the virus' impact on the oil industry, which has experienced a severe downturn as production began overrunning global demand even before the outbreak started disrupting the global economy. — Nick Juliano

REGULATORY CORNER

Interest writeoff regs coming: The Treasury Department and IRS are on track to finish regulations this month limiting the tax deduction for business interest expenses, according to a Treasury official. The limit was included in the 2017 tax overhaul. A key question is how the regulations will define interest. Businesses have pressed regulators to craft rules with a narrow definition to minimize administrative burdens on companies. Treasury and the IRS have indicated that broadly defining interest would promote rules that reduce tax avoidance. — Aaron Lorenzo

Title IX regulations expected any day now: Education Secretary Betsy DeVos' proposed Title IX regulations governing how schools and higher education institutions must handle campus sexual assault are in the final approval stage at OMB. The finished rules, which aim to curb Obama-era Title IX policies, are expected this month. — Bianca Quilantan

Capital rule ahead: The Federal Housing Finance Agency plans to issue a long-anticipated rule setting capital requirements for Fannie Mae and Freddie Mac by the end of March, according to agency Director Mark Calabria. The rule will set capital levels for the dominant, government-run mortgage financiers, a key factor for investors when the companies seek to raise private funds as they exit conservatorship. — Mark McQuillan

TRADE

U.S.-U.K. agreement in works: The Trump administration this month will formally begin negotiations with the U.K. for a comprehensive trade deal. U.S. Trade Representative Robert Lighthizer could detail the U.S. wish list for a deal when he speaks before the Oxford Union in London today, days after he met with U.K. International Trade Secretary Liz Truss for preparatory talks.

USMCA latest: Canada could also ratify the USMCA this month, making it the last of the three North American countries to pass the deal with the U.S. and Mexico. But the agreement will not go into effect until all three countries agree that they have met all the necessary obligations, which could take months. — Sabrina Rodriguez

HEARING HIGHLIGHTS

Hearing expected on online competition: As Washington continues to focus more on big tech, the Senate Judiciary antitrust subcommittee is planning a hearing this month on the marketplace dominance of companies such as Google and Apple. This is a recurring theme in Congress and at the Department of Justice, as lawmakers and regulators increasingly scrutinize the power of Silicon Valley. So far, Yelp CEO Jeremy Stoppelman is tentatively set to testify. Over the past few years, he's been among the most vocal critics of the power that companies such as Google have over smaller tech competitors. — Michael B. Farrell

Waters vs. Wells Fargo: House Financial Services Chairwoman Maxine Waters will devote three hearings this month to wrongdoing by Wells Fargo, with the beleaguered bank's CEO and board members scheduled to testify — an extraordinary amount of focus on a single company. The committee has spent months investigating Wells in response to a raft of customer abuses that came to light in recent years, from charging hundreds of thousands of people for auto insurance they didn't need to overcharging members of the military to refinance mortgages. — Mark McQuillan

TAX WATCH

Talking digital services tax: The OECD this month will host a working meeting in Paris as part of the effort to establish a new international framework on taxing tech giants like Google and Facebook. The OECD, which is spearheading the negotiations, aims to reach an agreement by the end of the year, but no public statement is planned following the meeting. — Aaron Lorenzo

Canada's top court to rule on carbon tax: The Supreme Court of Canada will hear provincial challenges to the federal carbon tax on March 24 and 25, after months of legal wrangling and opposing decisions from lower courts.

In February, the Alberta Court of Appeal ruled that the federal Greenhouse Gas Pollution Pricing Act is unconstitutional, calling it a "constitutional Trojan horse" that would give Ottawa "wide-ranging discretionary powers" that would infringe on provincial rights. The federal carbon price currently applies in Alberta, Ontario, Manitoba and Saskatchewan, where provincial governments have refused to implement their own.

The Alberta decision contradicts rulings from appellate courts in Saskatchewan and Ontario, which found last year that Ottawa has the authority to impose a minimum national price on greenhouse gas emissions. The Supreme Court is hearing appeals of the Saskatchewan and Ontario decisions this month, and Alberta will be an intervener in those hearings.

The stakes for this decision are especially high, as the Liberal government faces criticism from all sides for its attempts to balance resource development and climate change. — Sue Allan

CYBERSECURITY

Cyberspace Solarium Commission to release recommendations: The Cyberspace Solarium Commission's first report is expected March 11 and will make sweeping recommendations for how to streamline federal cyber bureaucracy and the types of legislation that Congress should pass to improve the nation's overall cybersecurity readiness.

The commission will also address federal cybersecurity leadership, an issue that both congressional Homeland Security panels plan to tackle as well.

Solarium leaders told POLITICO that lawmakers gave them "a wide remit" so it's "looking at many things," including "regulatory reform in certain critical infrastructure sectors" and wholesale structural changes to agencies' and committees' cyber responsibilities.

At the recent RSA Conference in San Francisco, Suzanne Spaulding, a commission member and former top DHS cyber official, said the recommendations will include "draft legislation that the staff has been working with lawmakers on." — Eric Geller and Tim Starks

SEE YOU AT SXSW

Let's talk cannabis: This is the third year the Austin, Texas, cultural festival SXSW will feature a "Cannabusiness" track. On March 18, POLITICO's Natalie Fertig will interview Rep. Earl Blumenauer (D-Ore.), the unofficial dean of the cannabis caucus on Capitol Hill. Other notable panel participants at the conference include Los Angeles cannabis czar Cat Packer, Denver Mayor Michael Hancock and cannabis medical researcher Sue Sisley. — Paul Demko

Word on the street: Pro Technology reporter Steven Overly will cover tech policy and innovation at the festival, which runs from March 13 to 22. The intersection of technology and the 2020 election, from voter outreach to digital campaign tactics to combating disinformation, will be a recurring theme. The tech luminaries who are bound to make headlines include Twitter CEO Jack Dorsey; Chris Hughes, Facebook co-founder turned Facebook critic; and Tristan Harris, a former design ethicist at Google. Former presidential candidate Andrew Yang will also take the stage to discuss the "promise and peril of big tech, and tradeoffs of government regulation." — Michael B. Farrell

TRANSPORTATION

Search for transportation funding continues: House leadership put out a vision document last month with some principles to inform an eventual surface transportation bill, with an eye toward a legislative draft being released sometime in the spring. Staff has already been working on a House draft for some time, but the longer it takes to conclude, the greater the likelihood that an extension will be needed when current surface transportation programs expire at the end of September. Policy aside, the thorniest problem remains: where to come up with the money to fund the spending Congress authorizes. Because of the Highway Trust Fund's worsening deficits, even maintaining status quo funding levels will require additional funding. — Kathryn A. Wolfe

FINANCIAL SERVICES

Constitutional challenge: The Supreme Court will hear arguments on March 3 on a challenge to the constitutionality of the Consumer Financial Protection Bureau's leadership structure, a case that could give the president greater power to fire the agency's director. The case, which centers on a legal provision stipulating that the president can remove the bureau's director only for cause, also has implications for the future of the FHFA, Fannie Mae and Freddie Mac's overseer.

Disgorgement fees: That same day, the high court will also hear arguments on a case that could dramatically reshape how the SEC imposes financial penalties. The issue rose to prominence in the wake of a major 2017 decision, Kokesh v. SEC , which set a time limit on the so-called disgorgement process, in which the regulator tries to recover all the profits an offender made off an illegal activity. Kokesh opened up a broader line of attack focused on whether the SEC should even be allowed to collect disgorgement penalties, a significant source of recovery the agency uses when enforcing federal securities laws. — Mark McQuillan

AGRICULTURE

Meetings and lobbying on tap for ag groups: Numerous agriculture trade and lobby groups are planning policy conferences or trips to visit lawmakers on Capitol Hill this month. Trump will address one such event, the National Association of Counties' annual legislative conference, on March 3 that will include a discussion on how rural county officials can tap USDA's $516 billion grant and loan programs.

The School Nutrition Association will hold its legislative action conference March 8-10 in Washington. Attendees will hear from USDA officials about what's on deck for 2020, which so far has been marked by significant rule changes affecting nutrition programs.

The Consumer Federation of America will hold its annual meeting March 11-12, which will include a keynote address from FDA Commissioner Stephen Hahn. — Liz Crampton

EMPLOYMENT & IMMIGRATION

More H-2B visas on deck?: The Trump administration is again considering raising the H-2B guest worker visa cap, acting DHS Secretary Chad Wolf confirmed at a Senate hearing last month. The program, which allows employers to hire seasonal, non-agricultural guest workers in sectors such as landscaping, housekeeping and construction, is capped at 66,000 visas. Wolf said a decision will come "very shortly." DHS extended the cap in each of the past three years in response to requests from businesses and lawmakers. — Rebecca Rainey

CANNABIS

Will New York pass marijuana legalization? This will be a crucial month for New York's legalization effort. Gov. Andrew Cuomo has indicated he wants to establish taxed, regulated recreational sales through the budget process, and the deadline to enact a spending plan is April 1. Key lawmakers have indicated they're largely on board with Cuomo's blueprint. But that harmony could collapse when it comes to the nitty-gritty of how to spend marijuana tax revenues. Last year, the effort collapsed in part over disagreements over what steps should be taken to ensure that people disproportionately targeted by criminal enforcement penalties — particularly low-income minorities — can benefit from legalization. — Paul Demko

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