The aftermath of the Venezuela strike will dominate Congress' time but they also need to be mindful of looming funding deadlines. POLITICO policy teams break down the issues that will kick off the new year. |
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— Defense and national security will be top of mind as business resumes on Capitol Hill. — Lawmakers are also under pressure to pass Appropriations legislation before Jan. 30 deadline, when stopgap funding expires. — Congress isn't backing down from efforts to block state regulations on artificial intelligence and data privacy. |
Agriculture— Farm bill update: Lawmakers say they will restart farm bill talks, now two years behind schedule. Many major issues traditionally included in farm bills were addressed in the Republican tax-and-spending law last summer, but some sticky areas still need to be resolved. For example, farm groups are pressing lawmakers to address state laws regulating pesticides and animal welfare, as well as a federal ban on intoxicating hemp products passed in the deal to reopen the government last fall. Congress must either secure a new farm bill deal or extend the current legislation by the end of this year. — On food policy: The Trump administration plans to release a long-awaited update to the Dietary Guidelines for Americans soon after Jan. 1. Health Secretary Robert F. Kennedy Jr. has promised guidelines that recommend whole food, and the famous pyramid is also expected to make a return. Major changes to the Supplemental Nutrition Assistance Program will also begin in January. States are already implementing tightened work requirements, as directed by the GOP’s megabill, and new restrictions barring recipients from using SNAP funds to buy soda and other junk food. |
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Additionally, the administration is expected to reveal several proposed food regulations in 2026, including ones that would define ultra-processed foods, impose restrictions on artificial dyes and overhaul the process for determining which additives qualify for the Generally Recognized as Safe designation. The timeline for those proposals is unclear. — Staffing woes: USDA’s internal watchdog found that the department lost more than 20,000 employees within the first half of 2025, with the Forest Service and Natural Resources Conservation Service experiencing the highest number of exits. Agriculture Secretary Brooke Rollins’ reorganization plan for 2026, which aims to move thousands of Washington-area employees to five new hubs across the country, is expected to lead to further departures. — Marcia Brown & Rachel Shin |
Trade— Tariff walk-back: The Trump administration is hitting pause on some tariffs it threatened in 2025, while looking at other ways to pressure foreign countries on economic policy. The White House issued a proclamation late on New Year’s Eve that it was delaying its increase in duties on imports of upholstered furniture, kitchen cabinets and vanities, which were due to go into effect on Jan. 1. The Commerce Department also announced on Dec. 31 that it will cut its anti-dumping duties on Italian pasta, which were set to soar to more than 90 percent. Trump cut tariffs on dozens more food products in November, zeroing out duties on a long list of agricultural items that can’t be grown or obtained in the U.S. The moves are part of a broader administration effort to respond to rising criticism about the cost of living and rising prices for everyday necessities like groceries and utilities. — Warning shots: But even as the White House tones down its tariff policies, officials are trying to signal to other major economies that they aren’t backing down on their trade demands. U.S. Trade Representative Jamieson Greer recently threatened to launch a Section 301 trade investigation into the European Union’s digital policies, after issuing a similar warning to South Korea earlier this fall. And Secretary of State Marco Rubio announced shortly before Christmas that the U.S. will deny entry to five foreign technology and disinformation leaders, including former officials involved in crafting overseas regulations that clamp down on American social media companies. — Emily Cadei, Ari Hawkins, Camille Gjis, Dan Desrochers, Gabby Miller |
Financial Services— Fed chair: January is set to be a busy month for the Federal Reserve. President Trump says he expects to announce his nominee to chair the central bank early this year, setting the stage for a new direction for the Fed once Jerome Powell’s term is up in May. The Supreme Court will hear oral arguments on Jan. 21 in a lawsuit over whether Trump can fire Fed board member Lisa Cook, who he alleges committed mortgage fraud (claims her lawyer has denied). Finally, the central bank’s rate-setting committee will meet Jan. 27-28, with Powell and other officials signaling a pause in interest rate moves after three consecutive cuts. — Labor woes: The Labor Department is scheduled to release the December jobs report on Jan. 9, which will provide a vital snapshot of the economy heading into the new year. Hiring has slowed, corporate layoffs are spiking and wage growth has cooled. Administration officials say the trend could reverse in the coming months as new tax deductions, deregulation and cheaper energy costs trickle through the economy. If not, Republicans could face serious challenges during their midterm election campaigns. — SEC crypto: Securities and Exchange Commission Chair Paul Atkins may finally answer the cryptocurrency industry’s calls for regulatory clarity. Atkins suggested that the Wall Street regulator is preparing to release its so-called innovation exemption as soon as January. That could give companies a better sense of how to navigate the SEC’s long-standing investor-protection rules as they wade deeper into crypto. But what the exemption will specifically cover is still not clear — and the guidance could be met with pushback from some legacy firms that have raised concerns about an unlevel playing field between crypto and non-crypto firms. — Congress housing: The House is expected to vote on a housing package advanced by the Financial Services Committee at the end of the year. The panel could also hold an additional housing markup as early as January. House Financial Services will hold hearings on financial technology regulation; evaluating the Committee on Foreign Investment in the United States; the Fed’s balance sheet; and oversight of HUD and the Federal Housing Administration. — Homebuilding boost: An appropriations package to fund HUD and other federal agencies, as well as bipartisan legislation to boost homebuilding, have been punted to the new year. Congress has until Jan. 30 to fund government agencies, including HUD, and avert a partial shutdown. But it's not clear when members will return to homebuilding reform negotiations and work through the differences between the Senate’s ROAD to Housing package and House’s Housing for the 21st Century Act. — Cassandra Dumay, Victoria Guida, Katherine Hapgood, Declan Harty, Sam Sutton |
Tax— The big question for 2026: Can Republicans pass another budget reconciliation measure this year? Clearly, some key GOP lawmakers are working to make that goal — which would allow Republicans to pass another fiscal measure without Democratic votes — a reality. It’s not certain that a second reconciliation bill would include tax provisions, particularly compared to a 2025 version that extended a range of expiring tax cuts from Trump’s first term while enacting some new tax relief items as well. Another party-line fiscal measure could focus on health care, given that expanded Obamacare tax credits have now expired. For instance, many Republicans have long favored beefing up tax-advantaged health savings accounts, something which could presumably be in the mix if reconciliation talks get more serious in 2026. The big issue with all of that is that a number of GOP lawmakers have shown little to no interest in trying to pass even a lighter megabill this year, something which could be even more difficult now that Congress is in a midterm election year. Even more to the point, a lot of those Republican reconciliation skeptics are in real positions of power — including leaders of committees that would be charged with fleshing out another fiscal package. — Something else to watch: A pile of largely bipartisan tax incentives also expired at the end of December, the most notable likely being a credit aimed at nudging businesses to hire people who have faced barriers to employment. Key tax writers showed little enthusiasm for extending those preferences in a year-end tax bill. But lawmakers have attached so-called tax extenders packages to government funding measures in the past — and Congress currently faces a Jan. 30 deadline for avoiding another shutdown, so there could be an effort to restore those incentives in an upcoming spending bill. — Speaking of reconciliation: The Treasury Department and the IRS continue to work overtime to release guidance for the tax items from last year’s One Big Beautiful Bill Act. Treasury and the IRS are facing a particular time crunch because Republicans put several key new incentives in place for 2025, meaning that taxpayers will be able to claim them when the next tax filing season opens in the coming weeks. Those include the new deductions for tipped income, overtime pay and for the interest paid on new automobile loans. And in fact, the IRS rolled out proposed rules on New Year’s Eve for the car loan interest deduction, which advised buyers to use their vehicle information label to check whether their new car, truck or van’s final assembly occurred in the U.S. — a requirement for claiming the incentive. — Looking abroad: The Treasury Department also has been working to win broader ratification for an exemption for American businesses from the global minimum tax. Republicans have long taken a dim view of the global minimum tax, the second pillar of a global tax deal clinched during the Biden administration. GOP lawmakers then went so far as to initially include a provision in the megabill that would have allowed the U.S. to retaliate against countries deemed to be employing discriminatory taxes, such as key parts of Pillar Two. Congressional Republicans then dropped that provision, popularly known as the “revenge tax,” after Treasury reached an agreement on an exemption for U.S. companies with other G-7 countries. Treasury since has been pressing to get that exemption approved through the Organization for Economic Cooperation and Development, the driving force behind the global tax deal. The Trump administration had hoped that would happen by the end of 2025 — but that didn’t happen, despite some signs of progress late in the year. Republicans will be keenly watching to see if that agreement is finalized early in 2026. — Bernie Becker |
Employment and Immigration— NLRB: The National Labor Relations Board spent much of 2025 without the power or enough appointees to take significant action. But this year stands to be much different. The Senate in December confirmed a slate of President Trump’s nominees not long before taking off for the holidays, including two NLRB board members and a general counsel for the agency. Republicans will now be able to shift power back toward employers, after the Biden administration made several moves on behalf of workers and labor unions. Business groups are eager for the NLRB to begin doing so, though the quasi-judicial process means it can take years to reverse how workplace labor disputes are adjudicated. — EEOC: Equal Employment Opportunity Commission Chair Andrea Lucas shared some of her 2026 plans in an interview with POLITICO. She's actively trying to raise the profile of the workplace anti-discrimination agency and encouraging white men to file charges if they feel they’ve been discriminated against. She also said to expect “a higher volume of public actions” this year. — H-1B visas: A federal judge Tuesday upheld the Trump administration’s authority to attach a $100,000 fee on H-1B visas, in the first stress test of the controversial move. The development comes as the Department of Homeland Security finalized a rule to overhaul how the H-1B visa lottery operates. Officials say the redesign, which skews the system toward higher earners in a given field, is an effort to protect American workers in entry-level positions. — Nick Niedzwiadek |
Education— New Pell finalized: The Education Department and a committee of representatives across the higher education community came to a consensus in December on how to implement the new Workforce Pell Grants. Pell Grants are awarded to low-income students to cover the cost of college and do not have to be repaid. Congress over the summer made training programs as short as eight weeks eligible for what are now known as Workforce Pell Grants — after about a decade of attempts. Previously, only programs more than 15 weeks long were eligible for Pell. The department’s final proposal is closely aligned with the One Big Beautiful Bill Act — the law that established the Workforce Pell program. The negotiators had some disagreements and concerns on some of the finer details in the proposal, but agreed on the overall concept. — Is it worth it?: Now that the agency wrapped up its rulemaking process for Workforce Pell, it’s moving on to the next target: accountability. Department officials and members of the higher education community will figure out how to implement the “do no harm” standard enacted by the GOP’s sweeping policy law during its next rulemaking session this month. The law requires that graduates of most college programs earn more than the typical person who does not have a postsecondary education. If the program fails to meet that standard in two of three consecutive years, it loses out on federal student aid. The negotiators will also revisit the department’s financial value transparency and gainful employment rules. The Biden administration’s version of the rules require schools to post data that shows graduates can afford the cost of the program they’ve chosen. They’re designed to help students choose degree or certificate programs that won’t leave them saddled with debt. — Rebecca Carballo |
Defense— Venezuela fallout: Lawmakers will take stock of President Donald Trump's decision to capture Venezuelan President Nicolas Maduro when they return to Washington. The unprecedented move has produced a partisan split-screen, with most Republicans falling in line behind Trump while Democrats criticized the administration for launching a major military operation without consulting Congress. Those political coalitions will be put to the test this week. Senate Democrats are expected to force a vote on war powers legislation that would block further military action against Venezuela without congressional authorization. Similar resolutions have come up short of the support needed to pass the Senate and House in recent months, with few Republicans willing to break ranks. Lawmakers of all political stripes want more details from the Trump administration. Leaders in both parties are urging administration officials to brief lawmakers upon their return on the operation and plans for what comes next in Venezuela. — Defense funding in focus: Lawmakers, with less than a month until another government shutdown, will turn to clinching a deal to fund the Pentagon for the remainder of the fiscal year. But plenty of hurdles remain to a defense spending deal, including exactly how much money to dole out to military programs. Leaders of the House and Senate Appropriations panels didn’t land on a topline Pentagon budget figure before Congress adjourned for the holidays last month. Deciding on an overall funding total — whether it matches or exceeds Trump's proposed budget — is necessary for appropriators to construct a full-year bill. The Senate Appropriations Committee in July approved an $853 billion Pentagon funding measure, a nearly $22 billion hike from the flat defense budget proposed by the administration. The House passed an $831.5 billion measure that aligns with Trump's budget level, although the bill was written before the administration sent details of its Pentagon spending proposal to Capitol Hill. |
Health Care— Fiscal 2026 funding: Congress has till the end of the month to set spending levels for government agencies, and the health department figures to be among the most contentious. President Trump in May proposed a massive $31.3 billion cut to the Department of Health and Human Services budget, but Congress has ignored it. Before they left for their Christmas break, senators said they were seeking to package their version of the HHS funding bill with four of the 11 other appropriations bills Congress needs to pass each year in an attempt to expedite them. The fiscal year started on Oct. 1. After a six-week government shutdown, Congress passed a funding bill in November that held spending flat through January. The Senate version, which the Appropriations Committee approved by a vote of 26-3 in July, proposes $116.6 billion for HHS — a $446 million increase in discretionary funds compared to fiscal 2025. Most of the increase would go to the National Institutes of Health. The bill would maintain funding for the Centers for Disease Control and Prevention. Trump’s budget plan, by contrast, would have cut NIH funding by roughly 40 percent and the CDC’s by more than 50 percent. The House version, which its appropriations panel released in September, would provide $108 billion, a $7 billion decrease, from fiscal 2025. House Appropriations Chair Tom Cole (R-Okla.) and his Senate counterpart, Susan Collins (R-Maine), reached an agreement right before the holidays on overall fundings levels for fiscal 2026, but have not yet made them public. Appropriators would much prefer to pass new spending legislation and not have to revert to a year-long continuing resolution as Congress did in fiscal 2025. — Obamacare subsidies: Congress allowed tax credits that make Affordable Care Act insurance plans less expensive to expire on Jan. 1, hitting customers with average premium increases of 26 percent, according to estimates. Democrats created the subsidies as a pandemic relief measure in 2021. They extended them in 2022’s Inflation Reduction Act but set the sunset date to keep the costs of the law down and to comply with budget rules. They demanded a permanent extension as a condition of voting for government funding legislation in September, but Republicans declined, prompting a six-week government shutdown. Eight senators in the Democratic caucus ultimately relented to reopen the government on the condition that the Senate take a vote on extending the subsidies. Senators rejected an extension on Dec. 11 by a vote of 51-48, with 60 votes required for passage. That seemed like the end of it, considering that most Republicans oppose extending the subsidies, arguing they have driven up the cost of insurance and were always intended to be temporary. But right before Congress left for the year, four Republican moderates in the House, Mike Lawler of New York, and Brian Fitzpatrick, Rob Bresnahan and Ryan Mackenzie of Pennsylvania, signed a discharge petition that will force Speaker Mike Johnson to call a vote on extending the subsidies in January. If the four side with Democrats to pass a bill, that would put the matter in senators’ hands. Republicans Susan Collins of Maine, Bernie Moreno of Ohio and Bill Cassidy of Louisiana have expressed the view that Congress could still agree to extend the subsidies temporarily if the extension were paired with changes Republicans want, such as anti-fraud measures or to redirect subsidy funding to tax-advantaged health savings accounts. For now, subsidies have returned to their original Obamacare levels from 2010. Gone are free plans for many low-income people and help for anyone earning more than 400 percent of the poverty level. — Health Care Pro Team |
Transportation— The clock is ticking: Congress is now in crunch time to pass the fiscal 2026 spending bill that funds DOT — among other appropriations legislation — ahead of a fast-approaching Jan. 30 deadline, when stopgap funding expires. Hopes of reaching a deal before the holiday recess were dashed at the last minute due to Democratic frustration over the White House’s decision to dismantle the National Center for Atmospheric Research in Colorado. Republican appropriators in the House and Senate say they’ve agreed on topline totals for the nine major spending bills but unless Congress gets moving fast, another stopgap bill or even a shutdown could be in the offing. — Whither ROTOR?: Last month, the Senate passed an amended version of Senate Commerce Chair Ted Cruz’ s ROTOR Act, S. 2503 (119), a response to last year’s deadly midair collision in Washington. Its passage came after Cruz and Senate Commerce ranking member Maria Cantwell (D-Wash.) lambasted a controversial military helicopter provision tucked away in the annual defense policy bill. Though the contested language is now law, the ROTOR Act now heads to the House, with its own amendment that would strike the military helicopter provision codified in the NDAA. Cruz’s legislation, however, is expected to face some turbulence from a key member of the lower chamber:Rep. Sam Graves (R-Mo.), chair of the House Transportation Committee, who doesn’t back the bill in its current form. — Preparing for the next shutdown: There are a few bipartisan bills floating around Congress that would pay air traffic controllers during future government shutdowns, albeit with different funding mechanisms. One of those bills, H.R. 6086, introduced by Graves and House T&I ranking member Rick Larsen (D-Wash.), advanced out of committee just before the holiday break. However, it’ll face an uphill battle with congressional appropriators, some of whom believe paying controllers during future funding lapses would prolong shutdowns even further. — Coming soon?: Due (in part) to the recent government shutdown, neither the House nor Senate wound up releasing bill text for their respective versions of the surface bill before Congress skipped town last month. With the Biden-era surface transportation reauthorization set to expire this September, lawmakers will have their work cut out for them to move quickly on its follow-up. Graves has told POLITICO the House version of the bill should be released and get a markup sometime in the “first part” of this year. On the other side of Capitol Hill, Shelley Moore Capito (R-W.Va.) — chair of the Senate Environment and Public Works Committee — has said she’s aiming to release surface bill text and hold a markup in early March. — Pavan Acharya |
Technology— Preemption Redux: The House is expected to unveil sweeping legislative frameworks as early as January on AI and data privacy that promise to preempt a growing “patchwork” of state laws. Rep. Jay Obernolte (R-Calif.), who led the bipartisan AI task force last Congress, recently told POLITICO that language for his bill, which would codify portions of Trump's AI Action Plan and preempt state laws, is being finalized. The legislation will serve as a counterpart to Sen. Cruz’s regulatory “sandbox” bill. There are some early rumblings that a state AI moratorium could find its way onto the funding bill that must pass by Jan. 30 to prevent a government shutdown. That would require a tremendous amount of legislative horse-trading in the first few weeks of January, making it a major lift for the tech lobby. An all-Republican data privacy working group, led by Rep. John Joyce (R-Pa.), is also putting the finishing touches on national privacy legislation that will preempt state laws, as POLITICO exclusively reported. It will offer the first glimpse into how the GOP wants to protect American consumers’ data this Congress, after House E&C Chair Brett Guthrie (R-Ky.) decided to start from scratch under his leadership, casting aside previous efforts including the American Privacy Rights Act. Obernolte, also a member of the working group, told POLITICO to expect a framework that takes most state’ privacy laws into account, although Texas’ data privacy law is a favored framework among Republicans such as Cruz. — Chip war incoming?: Trump’s decision to greenlight the sale of Nvidia’s powerful H200 chips to China in December, following CEO Jensen Huang’s swing through Washington, rattled lawmakers of all stripes on the Hill, some of whom have introduced legislation to increase congressional oversight such deals. House Foreign Affairs Chair Brian Mast (R-Fla.) unveiled the AI OVERWATCH Act in December to ensure congressional oversight over the sale of advanced AI chips to adversary nations, as it does with arms sales, while supercharging semiconductor exports to American allies. House Foreign Affairs ranking member Gregory Meeks (D-N.Y.) rolled out the RESTRICT Act to block most advanced AI chip sales to China and other “countries of concern.” The legislation, which 13 House Democrats have signed onto, also calls for a license-free export pathway for U.S. companies operating data centers overseas. While the AI OVERWATCH Act is more likely to pass given its less aggressive posture than the Democratic RESTRICT Act, it signals Democrats are starting to take a tougher stance on China than even Republicans on chip exports. — Social media execs take the stand: A bellwether product liability trial kicks off in Los Angeles into whether social media companies intentionally designed their platforms to be addictive. The Jan. 27 trial is the first of three that will test how juries respond. The results could help resolve hundreds of other similar cases that are expected to go to trial this year. Meta CEO Mark Zuckerberg, Snap CEO Evan Spiegel and Adam Mosseri, head of Instagram, are slated to testify. The trial comes after Los Angeles Superior Court Judge Carolyn Kuhl rejected the companies’ argument that a provision known as Section 230 shields the companies from liability. Meanwhile, a bipartisan group of senators want to overturn Section 230 of the Communications Decency Act. Senate Judiciary Committee ranking member Dick Durbin (D-Ill.) and Sen. Lindsey Graham (R-S.C.) introduced a bill in late December seeking to repeal the provision, which protects online platform providers from being held liable for content posted by third parties on their platforms. — Eyes on media ownership: The media industry is watching to see how the Federal Communications Commission addresses caps limiting the size of local broadcasters. A 2004 law limits companies to only reaching 39 percent of U.S. households, although the broadcast lobby wants that lifted or removed to better compete against online streaming platforms. Many cable companies, consumer advocacy groups, organized labor and Democrats are wary of broadcast TV consolidation, warning it could hurt the diversity of viewpoints on broadcast news and hike consumers’ cable bills. Some conservatives, meanwhile, want to unleash consolidation to give affiliate broadcast station groups more power over nationwide programmers. — Gabby Miller, Katherine Long, John Hendel and Brendan Bordelon |
Cybersecurity— Cyber plans: Lawmakers and White House officials are ringing in the new year with a full slate of cyber-related policy priorities, including reauthorizing critical cybersecurity laws and putting out a new national cybersecurity strategy. Meanwhile, one key cyber position remains unfilled — and it’s unclear whether that role will be filled anytime soon. The Office of the National Cyber Director is due to release a new national cyber strategy sometime in the coming days. POLITICO reported last month that the strategy will contain six pillars — including securing critical infrastructure and changing adversary behavior in cyberspace — and is likely to be much shorter in length than previous White House cyber strategies. The most recent strategy was released in 2023 by the Biden administration, while the first Trump administration put out a version in 2018. President Trump is also set to sign a short executive order in conjunction with the national cyber strategy’s release, as POLITICO first reported. — On Capitol Hill: Lawmakers have until the end of the month to either approve the 2026 federal funding package or pass a continuing resolution to prevent another government shutdown. The current continuing resolution that reopened the government in November included clauses temporarily extending both the 2015 Cybersecurity Information Sharing Act — a key cyber law that incentivizes the private sector to share cyber threat data with the government — and a program that gives state and local governments funds to shore up cybersecurity programs. Bipartisan lawmakers in both the House and Senate are pushing to reauthorize both programs long-term — though Senate Homeland Security Committee Chair Rand Paul (R-Ky.) continues to spoil those plans. His panel has jurisdiction over both pieces of legislation. The senator told POLITICO in December that he will only allow the reauthorization of the 2015 CISA law to proceed out of his committee if language banning the Cybersecurity and Infrastructure Security Agency from carrying out its work to counter disinformation is added in — a fringe idea that has not garnered widespread support. (The cyber agency and the bill are not directly connected, though they do share an acronym.) — Stalled nomination: And CISA, the nation’s cyber defense agency, continues to be in leadership limbo heading into the new year. The Senate failed to bring the nomination of Sean Plankey, Trump’s pick for CISA director, to the floor for a vote before going on holiday recess, opening the possibility that Plankey may have to be renominated by the White House and start the process over this year. Meanwhile, POLITICO reported last month that the agency’s acting director, Madhu Gottumukkala, has come under fire for his handling of a failed polygraph. And without a Senate-confirmed leader on the books, Gottumukkala will likely stay in the agency’s top role for the foreseeable future — a prospect some current and former cybersecurity officials are increasingly wary of. — Maggie Miller |
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