September Washington D.C. Preview

As the August recess wraps and an Election Day looms just two months away, September is kicking off a busy fall season. In this month’s CEO Report, Pro policy teams give an outlook on what to expect in the coming weeks. — Federal Reserve officials are planning to meet later this month, and another round of significant interest rate hikes are expected to come out of it in an effort to combat the nation’s spiking inflation.   — Despite the just-passed Inflation Reduction Act, which made a fair number of tax changes, Congress still has work to do on a number of tax extenders.   — G-20 trade ministers will also meet toward the end of the month amid a contentious international landscape between the Russian invasion and rising tensions between the U.S. and China. AGRICULTURE White House Nutrition Conference and Ag Nominations on tap: The White House Conference on Hunger, Nutrition and Health is set for Sept. 28 in Washington, D.C. A comprehensive legislative package is not expected from the conference in advance of the November midterms, but people familiar with the planning said the conference will focus on executive actions and public-private partnerships, including addressing inflated food prices. The conference will also inform lawmaker conversations in front of farm bill season. Sen. Cory Booker (D-N.J.) has outlined several policy priorities for the conference, including stricter food labeling rules to promote healthy food and curb chronic diseases.   McKalip confirmation likely: The Senate in September is expected to confirm Doug McKalip, the nominee for Chief Agricultural Negotiator at the U.S. Trade Representative. Following a confirmation hearing in July, the Senate Finance Committee will likely advance him to a full Senate vote when they meet on Sept. 7. Though the nomination only requires 50 votes, at least three Republicans have indicated they would support McKalip. The position has been vacant for nearly two years after the administration’s first nominee, Elaine Trevino, failed to advance.   Preparing for the 2023 farm bill: Congress will write a new farm bill in 2023, and legislators have already begun laying the groundwork. In a marathon of hearings, House Ag Committee members have indicated their goals, and listening sessions held by both chambers have offered insight into producers’ priorities. Nutrition, which makes up about 80 percent of the bill, was particularly contentious with the parties sparring over whether to protect or roll back SNAP. At listening sessions, producers have urged Congress to boost the safety net in order to reduce the need for ad-hoc spending and meet demand caused by an increase in disasters causing yield loss.   USDA rulemaking: The USDA is accepting public comments until Sept. 6 regarding how poultry processing companies pay contract poultry farmers, one of three rules the department is expected to propose addressing competition in agriculture. A public comment period has already closed for the first of those proposed rules, which would increase transparency and fairness to contracts between poultry processing companies and contract farmers. The Agriculture Department is also accepting public comments for a proposed rule expanding and clarifying living and transportation standards for livestock production that is certified USDA organic. — Marcia Brown and Garrett Downs FINANCIAL SERVICES Supersize order: Federal Reserve officials will meet Sept. 20-21 to decide how high to raise borrowing costs, and they're expected to deploy another supersized interest rate hike to curb the biggest inflation spike the U.S. has seen in more than four decades. Some central bank policymakers prefer to raise rates more gradually, by increments of half a percentage point, while others want to move borrowing costs higher faster — which could mean an increase of three-quarters of a percentage point. Either way, the Fed probably isn't close to being done yet, which is spurring concern that the world's largest economy is headed for a recession.   Crypto Congress: This month's congressional calendar could include some of the most consequential action to date on crypto legislation.   Prior to the summer recess, Senate Agriculture Chair Debbie Stabenow (D-Mich.) and top Republican Sen. John Boozman (R-Ark.) introduced a bill that would require crypto exchanges and other brokerages to register with the Commodity Futures Trading Commission. Even with a crowded Senate agenda going into the midterms and lame duck session, both Boozman and Stabenow said they’d like to hold a markup this month. The legislation is being closely watched by the upstart industry, since CFTC supervision would probably be less strict than that of the Securities and Exchange Commission, which is also angling to oversee crypto.   Meanwhile, House lawmakers are said to be preparing their own version of the bill, which would task the CFTC with developing standards that would protect customers and force crypto businesses to disclose conflicts of interest – a significant expansion of the financial derivatives regulator’s responsibilities.   That isn’t the only crypto legislation on the docket. House Financial Services Chair Maxine Waters (D-Calif.) and Rep. Patrick McHenry (R-N.C.) are prepping a bill that would create new rules for the companies behind stablecoins — digital tokens whose value is tied to fiat currencies like the U.S. dollar. Those tokens are a common method of payment in digital asset and decentralized finance markets and are being positioned for broader adoption in commercial payment systems as well.   Federal Reserve and Treasury officials have warned for months that stablecoins could pose a risk to the financial system if they remain unregulated at the federal level.   What’s up? Wall Street’s overseers are bound for yet another sprint in September. That's the month when the Securities and Exchange Commission and the CFTC usually file a slew of cases. By the end of this month, the regulators are expected to levy more than $1 billion in fines against some of the world’s biggest banks, following a long-running investigation into how traders use platforms like WhatsApp to conduct business and to what extent the institutions have been able to monitor and track the messages. U.S. authorities require brokerages to archive such communications.   SEC officials, meanwhile, will turn their attention to Hong Kong following a deal the U.S. and China struck in late August. Inspectors for the Public Company Accounting Oversight Board are expected to be on the ground there to finally begin auditing the auditors of Chinese- and Hong Kong-based companies listed on U.S. stock exchanges as mandated by Congress. However, there's skepticism over whether Beijing will hold up its side of the agreement. If not, the U.S. warns that it will kick some 200 Chinese- and Hong Kong-based firms off American exchanges in early 2024. But lawmakers are still open to accelerating that timeline to early 2023, as well. — Victoria Guida, Sam Sutton, Declan Harty TAX IRA, TCJA and more: If it’s fall, chances are that you’ll find discussions going on in the Capitol about a potential year-end tax deal.   And 2022 looks to be no different, even though Democrats just passed a measure — the Inflation Reduction Act — that made a fair number of tax changes.   The IRA didn’t just enact a new corporate minimum tax. It also took care of a number of short-term clean energy tax breaks that lawmakers might otherwise have had to deal with after November’s election.   Luckily for lawmakers, there are a number of outstanding tax issues they could potentially tackle.   Perhaps the provision getting the most attention among the business community is the new requirement that companies write off their research costs over five years. Both Democrats and Republicans have shown an interest in reversing that change, which the GOP put into place as part of their 2017 tax law, and allowing businesses to immediately expense those investments.   Companies also have their eyes on a pair of other new changes caused by the Tax Cuts and Jobs Act, dealing with both the interest deduction and a broader expensing provision.   Other potential topics of discussion include a possible sequel to 2019’s retirement security legislation and whether to offer tax relief to car dealers trying to cope with inventory requirements under the “last in, first out” accounting standard.   Then there’s a longstanding bipartisan bill to combat inflated tax benefits from charitable land donations, and interest in pulling back on a requirement in the Democrats’ 2021 coronavirus relief measure that would require many more taxpayers to disclose income 1099-K tax forms.   It also wouldn’t be a surprise for Democrats to continue to bring up some of the tax benefits they couldn’t get across the finish line in the IRA, like the expanded Child Tax Credit or raising the $10,000 cap on state and local tax deductions.   And then the biggest variable of all: What happens in November’s election will almost certainly affect the negotiations over any year-end tax deal, though exactly how is still up for debate.   Republicans remain favored to retake the House, though the size of a potential majority is up in the air. Meantime, it’s anyone’s guess who’ll win the Senate. — Bernie Becker EDUCATION Title IX deadline: The comment period for Education Secretary Miguel Cardona’s proposed Title IX rule ends on Sept. 12. Catherine Lhamon, the Education Department’s civil rights chief, indicated that it’s unlikely the agency will extend the comment period despite GOP lawmakers requesting an extension. While the Education Department unveiled its proposed Title IX rule that extends discrimination protections for LGBTQ students in June, the proposal left out athletics. Cardona and Lhamon said the department is working on a separate rule on sports eligibility. Dozens of women’s rights and gender justice advocates are urging President Joe Biden to quickly release a Title IX rule that would determine transgender students’ eligibility to play sports.   HBCU week: This month, the Biden administration will host leaders of historically Black colleges and universities for its annual HBCU week convening from Sept. 20-23. The conference comes as HBCUs are still asking federal law enforcement for answers on who is responsible for the bomb threats that rocked their campuses earlier this year. Howard University, Vice President Kamala Harris’ alma mater, received two more threats in August.   Student loan relief: Federal student borrowers can start preparing for Biden’s sweeping debt forgiveness plan. They can begin applying for the debt relief program as soon as October, according to Bharat Ramamurti, deputy director of the White House National Economic Council. He said borrowers could expect to receive relief within four to six weeks after applying for it. — Bianca Quilantan HEALTH CARE The outlook for FDA user fee programs: The FDA user fee programs — designed by Congress to bolster the agency’s ability to review medical products in a timely manner — have grown over time. By fiscal 2020, user fees accounted for more than 45 percent of the agency’s budget, according to the Congressional Research Service. Advocacy groups and some industry groups argue that the programs' growth is unsustainable and that Congress must appropriate more funding for the agency.   The reauthorization proposals for the Prescription Drug User Fee Act (PDUFA VII), Medical Device User Fee Amendments (MDUFA V), Generic Drug User Fee Amendments (GDUFA III) and Biosimilar User Fee Amendments (BsUFA III) are being negotiated.   House Energy and Commerce Chair Frank Pallone (D-N.J.) and ranking member Cathy McMorris Rodgers (R-Wash.) have worked to keep the committee’s user fee reauthorization process bipartisan. In June, the House passed its version of the user fee package, H.R. 7667. But Senate HELP Chair Patty Murray (D-Wash.) and ranking member Richard Burr (R-N.C.) pursued a wide-ranging package that included overhauls of the FDA’s oversight of the diagnostics, supplement and cosmetics industries. During a committee markup, several bipartisan amendments were added to the bill. But Burr opposed several of the amendments and eventually voted against advancing the bill.   In mid-July, he introduced a spartan user fee package, S. 4535 , that reauthorizes the four user fee agreements for five years but strips out most amendments. However, Pallone and McMorris Rodgers are pushing the Senate to take up the House package.   Congressional staff and lobbyists expect lawmakers to make progress toward an agreement in September, but furlough notices may soon need to be issued to FDA staffers, warning them that their jobs may be in jeopardy.   The government is supposed to issue 60-day reduction-in-force notices to staff that could potentially be laid off. Such notices have been issued before, but former FDA Commissioner Scott Gottlieb delayed their distribution in 2017, citing the likelihood of a reauthorization deal being reached by Congress, which did happen.   FDA Commissioner Robert Califf has signaled he might do the same if Congress appears close to an agreement. The agency expects PDUFA carryover balances will last into early November, meaning Congress may have time to reach a deal. Other user fee programs also have sizable carryover balances.   Congressional staff and lobbyists anticipate a user fee package will likely be attached to a continuing resolution to temporarily fund the government in September. — David Lim TECHNOLOGY American data privacy might be dead: The American Data Privacy and Protection Act likely won't make it to the Senate floor in its current iteration, despite making it through the Energy & Commerce Committee with an overwhelming vote of 53-2. House Speaker Nancy Pelosi expressed concerns that the strongest consumer data privacy legislation to pass Congress to date would preempt California’s “landmark” privacy state laws. All hope is not lost though, as Pelosi says she will work with the E&C Committee to address the concerns of California lawmakers.   Big tech watch: The Consumer Financial Protection Bureau will likely release a widely anticipated report on the findings of its review of how major technology firms handle consumer payments data. CFPB Director Rohit Chopra made a splash when, in his second week on the job, he ordered six firms — Google, Apple, Facebook, Amazon, Square and PayPal — to turn over information on how they use that data as part of an “inquiry into Big Tech.” Lawmakers and industry are both keen to see the report. The bureau is also moving forward on a related rulemaking under Sec. 1033 of the landmark Dodd-Frank law. Chopra told POLITICO that he intends to convene a small-business review panel on the rulemaking — which will outline standards around consumer-authorized access to financial data — before the end of the year. — Mohar Chatterjee and Katy O'Donnell ENERGY Price cap: The Treasury Department is closing in on a final agreement with some countries to cap the price that importers pay for Russian oil, an effort aimed at shrinking a key source of revenue that the Kremlin has relied on to finance its war in Ukraine. Several elements of the plan remain unclear, however, including how many countries will sign on, whether the coalition countries can enforce the cap and how President Vladimir Putin will respond.   Treasury Secretary Janet Yellen helped pave the way for a tentative agreement among G-7 leaders to explore the idea further, and a handful of other countries, including South Korea, have signaled their support. The goal is to align the price cap’s effective date with new European sanctions set to take effect on Dec. 5 on shipping services for Russian oil exports. Treasury officials are working with their international counterparts to finalize legal frameworks for the cap in each jurisdiction, which are expected to be unveiled in mid-October. Meanwhile, Russian Central Bank Governor Elvira Nabiullina has said Russia won’t sell to countries that impose a cap.   Lawmakers take on permitting reform fight: In order to secure Sen. Joe Manchin ’s (D-W.Va.) support for the Inflation Reduction Act, Democratic leaders agreed to pursue secondary legislation that would tackle federal permitting reform for infrastructure projects once lawmakers return from the August recess.   Progressives and some environmentalists are vocally opposed to the deal, which Manchin recently previewed. Their concern is that the bill would boost fossil fuel projects, while undercutting necessary environmental reviews. Still, advocates in the clean energy industry acknowledge some form of permitting reform is necessary, particularly if the U.S. wants to transition to green energy at the speed needed to reach its climate targets.   Despite permitting reform being a long-time GOP priority, several Republicans have also vowed to fight the measures. Manchin aims to include the permitting measures as part of an upcoming must-pass, continuing resolution to keep the government funded. — Kate Davidson and Kelsey Tamborrino DEFENSE Members set to grapple over defense topline: Senate and House members return in September from the long August recess with a packed agenda for defense. On the policy side, the House and Senate Armed Services committees must still find a compromise to their competing versions of the National Defense Authorization Act. The House approved a $37 billion increase over Biden’s $802 billion request, and the Senate bill advocates a $45 billion boost.   As for appropriations, the House Appropriations Committee largely stuck to Biden's request of $762 billion for the Defense Department. On the Senate side, the total is $30 billion higher. The two sides also must come together on plans for shipbuilding and aviation programs. But those negotiations will remain stuck until leaders agree on overall numbers for defense and domestic budgets, and a continuing resolution to start the fiscal year is almost certain. — David Brown EMPLOYMENT AND IMMIGRATION Biden's labor nominees in limbo: Biden has seen his oft-touted labor agenda slowed by the Senate’s tight margins, including his nominations to key posts.   Biden’s initial pick to lead DOL’s Wage and Hour Division, David Weil, had his nomination sunk on the Senate floor. And another vote went sideways when it was headed for a deadlock without the vice president on hand to break the tie.   In fact, there’s now a surfeit of posts across the constellation of labor-related agencies that need confirmation votes — though they’ll likely need to be squeezed in around judicial nominations that Senate Democrats are prioritizing for the time being.   The effects are being most acutely felt at the Equal Employment Opportunity Commission, where Republicans continue to hold a majority even as one GOP member’s term expired this summer, limiting what the Democratic leadership can do. A vote on Biden’s nominee to head the EEOC, attorney Kalpana Kotagal, is stalled in the Senate. — Nick Niedzwiadek TRADE G-20 therapy, led by Indonesia: Indonesia is set to host the Sept. 21-23 G-20 trade ministers meeting, where officials will grapple with a contentious international landscape amid the Russian invasion and rising tensions between the U.S. and China. All G-20 members, including Russia, attended three recent meetings chaired by Indonesia, but countries were unable to produce a joint communiqué, underscoring strained global ties.   IPEF’s eyes challenges ahead: U.S. Trade Representative Katherine Tai and Commerce Secretary Gina Raimondo are hosting top trade officials from 13 other countries for the first face-to-face ministerial meeting of the proposed Indo-Pacific Economic Framework on Sept. 8 and 9. The meetings will focus on four pillars of economic cooperation: supply chains, trade, clean energy and anti-corruption enforcement.   USMCA tensions rise to a boil: The Biden administration is staring down an Oct. 3 deadline to ask a U.S.-Mexico-Canada Agreement dispute settlement panel to review a complaint that the Mexican president is favoring state-owned energy entities in violation of the continental trade deal. The administration in July requested consultations with Mexico, kicking off a 75-day deadline to resolve the dispute, after which the U.S. and Canada could escalate the case. Members of Congress and industry supports further action with the argument that Mexico’s policies disadvantage U.S. companies and could harm the environment.   Pelosi complicates Taiwan talks: Taiwan is holding the first round of formal trade negotiations with the U.S. sometime this fall. The exact date is still to be determined, and the talks follow Pelosi’s inflammatory visit to Taipei. Negotiations are set to take place under the direction of the American Institute in Taiwan and Taipei Economic and Cultural Representative Office in Washington, due to past obligations to China which required the U.S. to cut off formal diplomatic ties. — Ari Hawkins CYBERSECURITY Cyber in the water: Eyes are on the EPA to release an implementation memo this fall mandating cybersecurity threat response inspections for roughly 1,600 water systems across the U.S. This will be the latest in a line of critical infrastructure regulations from the Biden administration — and one of the most closely watched. But underfunded utilities regulators with limited cyber expertise may lack the knowledge needed to shoulder their rapidly evolving cybersecurity responsibilities.   Where’s the money, honey: Several federal agencies rely on the National Defense Authorization Act for their cybersecurity programs, so there’s a lot of anticipation for how that funding will shake out. This year’s NDAA includes provisions to address everything from cybersecurity vulnerabilities in defense supply chains, to a pilot program for “dedicated X-band small satellite communications technologies.” The NDAA also calls for more transparency about DoD’s electromagnetic spectrum strategy and their purchase of Americans’ location and internet metadata. — Mohar Chatterjee