December Washington D.C. Preview

The change of power in Congress will blow up everything from government funding legislation to confirming key administration officials. In the final CEO Report for this Congress, Pro policy teams give an outlook of what to expect for the 118th session. — A divided Congress puts health care legislation in peril, with Democrats’ goals of building on insurance and drug pricing provisions passed in 2022 dead on arrival in a GOP-led House.   — The administration’s cybersecurity priorities are in serious danger with Republicans taking control of the House, with much hinging on who takes the top spot on the House Homeland Security Committee.   — Key parts of President Joe Biden’s education agenda are now destined to collect dust over the next two years, including his proposals for universal pre-K, free college and doubling the Pell Grant. AGRICULTURE Farm bill negotiations on tap in the new year: Next year is shaping up to be a consequential one for agriculture policy as a farm bill is due in 2023. That means the Agriculture Committee in both chambers will be dominated by debate and hearings over what will be included in the nearly half-trillion-dollar bill. That will take place amid an aggressive oversight agenda promised by House Republicans and the need to act on key administration agriculture positions that remain unconfirmed.   — Leftovers: Time is short in the 117th Congress, which means the 118th may have plenty of unfinished work that finds its way into the farm bill.   Reforms to the cattle market system are top candidates to make it into the farm bill. Sens. Chuck Grassley (R-Iowa), Deb Fischer (R-Neb.) and Jon Tester (D-Mont.) have pushed for votes on a pair of bills to increase competitiveness in the cattle industry. Grassley recently told reporters that it’d “be tough” to get them through before the end of the year.   Those bills are the Cattle Price Discovery and Transparency Act and the Meat and Poultry Special Investigator Act.   But Sen. Debbie Stabenow (D-Mich.), the chair of the Senate Ag Committee, said they could be incorporated into the farm bill.   — GOP oversight: There’s a new party in leadership in the House, and they’re planning to launch a slew of investigations into the Biden administration’s agriculture priorities.   A House GOP aide with knowledge of plans told POLITICO to expect an inquiry into the USDA’s $3.5 billion partnerships for climate-smart commodities program. Likely incoming House Ag Chair G.T. Thompson (R-Pa.) is concerned about that amount of money being spent “without any congressional input,” the aide said. He’s previously panned the use of the Commodity Credit Corporation to fund climate programs at USDA. — Garrett Downs BUDGET AND APPROPRIATIONS Omnibus now — pain later: Top appropriators are working to ink a massive year-end funding deal in the coming weeks that would boost federal agency budgets for the current fiscal year. The stakes are high — it could be the last so-called omnibus package for at least next two years, with lawmakers keenly aware that passing annual spending bills in the next Congress will only get more complicated.   While House Republicans just voted to keep earmarks for their majority next year, possibly making the appropriations process more palatable for some, the GOP conference is deeply splintered over federal spending. The politics only get trickier with a presidential election looming in 2024.   “As fractured as we are on a lot of other issues, there’s probably no better indicator of the fractures in our caucus than those on federal spending,” Rep. Steve Womack of Arkansas, the top Republican on the Financial Services spending subcommittee, said last month . — Caitlin Emma TRADE Trade tensions could escalate in 2023: The next Congress is unlikely to bring about an abrupt shift in trade policy, despite the desire of some lawmakers to see exactly that. House Republicans, with their new narrow majority, have signaled plans to press President Joe Biden to pursue a more aggressive trade agenda. Many have called for a renewal of the Trade Promotion Authority so that Biden can start brokering free trade agreements with the U.K., Kenya and other trading partners.   Here’s the rub: Biden has shown no desire to cooperate. His administration continues to shun free trade agreements in favor of a new type of pact, as best illustrated by its Indo-Pacific Economic Framework. Nevertheless, Biden and his trade officials stand to face ramped up scrutiny when lawmakers return to Washington next year. Democrats and Republicans alike are increasingly frustrated that Biden’s economic initiatives have cut out the formal role for Congress in setting trade policy. Indeed, a bipartisan group of senators just recently wrote to Biden asserting that his newfangled trade deals must still come to them for approval.   The implementation of the Inflation Reduction Act could also hang over the new Congress, as key U.S. trade partners remain aggravated at provisions that require electric vehicles to be manufactured in North America to qualify for tax credits as well as a range of other subsidies. The Biden administration has expressed its intent to assuage the European Union, South Korea and Japan, but the path to a satisfactory resolution remains unclear and trade relations could sour as a result . — Steven Overly HEALTH CARE Hunting for agreement: A divided Congress means some of the bigger items that members of both parties touted in recent months have almost no chance of becoming law.   Democrats’ control of the Senate will block Republican Sen. Lindsey Graham ’s (S.C.) proposed 15-week abortion ban, which openly split the GOP after its September introduction.   And Democrats’ goals of building on the insurance and drug pricing provisions they passed in 2022 are dead on arrival in a GOP-led House.   Still, the Republicans who are poised to lead key committees in the new Congress have floated several ideas that could garner some bipartisan support, such as reforms to pharmacy benefit managers and improving access to mental health care.   Those areas appear to be the likeliest targets for cooperation between Sen. Bernie Sanders (I-Vt.), the incoming chair of the Senate HELP committee, and Bill Cassidy (R-La.), incoming ranking member for the same committee. Cassidy told POLITICO he also hopes to work on drug pricing, oversight of the implementation of the surprise medical billing law he helped design and raising dyslexia as a policy priority.   — All eyes on drug pricing: The cost of drugs, in particular, is expected to be a key focus for the 118th Congress.   But it won’t be easy. Rep. Buddy Carter (R-Ga.), who sits on the Energy and Commerce Committee’s Health Subcommittee, has pointed out that three companies account for 80 percent of the PBM market, a situation that makes it tricky to enact reforms without raising costs for beneficiaries and the government.   “The companies argue that [PBM reform] is going to result in higher insurance premiums, and to a certain extent they’re right, because they control both” sides of that equation, he told POLITICO. “When you squeeze a balloon, it just comes out somewhere else.”   Meanwhile, the industry’s main lobbying group, the Pharmaceutical Care Management Association, is preparing for a year of oversight. PCMA President and CEO JC Scott recently told POLITICO that the industry will work to “broaden the understanding” among lawmakers of what PBMs do, including “the clinical expertise, the pharmacy expertise, the patient-facing work that our companies do to make our experience at the pharmacy counter better.”   There could also be bipartisan agreement on permanently expanding telehealth rules tied to the Covid-19 public health emergency. If Congress doesn’t extend the rules, rural providers will face hassles and costs unwinding their telehealth adaptations — and their patients will suffer. Telehealth is broadly popular but paying for it remains a challenge. Though a bill sailed through the House earlier this year, some fear that a Congressional Budget Office score showing the legislation would cost Medicare $2.3 billion to cover expanded virtual care until 2025, on the presumption that telehealth increases the number of doctors’ visits.   There will be far less cooperation on Covid-19. Republicans in the House are unlikely to approve any new funding and GOP leadership is weighing three options for the Select Subcommittee on the Coronavirus Crisis that Democrats have used since 2020 to probe the Trump administration’s handling of the pandemic: shut it down, turn it into a cudgel against the Biden administration or replace it with a China-focused committee that would investigate the origins of Covid-19 along with other trade and security issues. — Dan Goldberg EDUCATION Find some ice for Biden’s education agenda: Biden’s proposals for universal pre-K, free college and doubling the Pell Grant — which were tabled when the Build Back Better Act collapsed — are now destined to collect dust over the next two years. A split Congress means very little of the president’s agenda may get through. And a Republican-led House education panel has vowed to heavily scrutinize the Biden administration’s student debt forgiveness effort, which will be reviewed by the Supreme Court this term. Republicans are also expected to lean into their investigative and oversight powers to target Covid school relief spending, teachers unions and the Biden administration’s proposed Title IX rule.   — Incoming on the Senate HELP Committee: Sens. Bernie Sanders and Bill Cassidy are expected to lead the Senate HELP Committee. Cassidy is expected to become the next ranking member of the committee after Sen. Richard Burr (R-N.C.) retires at the end of the year. Cassidy’s bid for the top GOP post follows Kentucky Sen. Rand Paul ’s decision to seek the ranking member slot on the Senate Homeland Security and Governmental Affairs Committee. While Sanders is expected to push forward on college affordability, Cassidy has been an advocate for school choice, the College Transparency Act and teaching students with dyslexia.   — Over on the Education and Labor Committee: Rep. Bobby Scott (Va.) will continue to lead Democrats on the committee, but Rep. Virginia Foxx (N.C.) is fighting to wield the gavel again for Republicans. GOP members on the committee are supporting her bid for a waiver to lead the committee after chairing once and serving twice as ranking member. The Republican steering committee is expected to make its decision by early December. Two other members have been floated to lead the committee — Reps. Tim Walberg (R-Mich.) and Jim Banks (R-Ind.) — but they have also backed Foxx’s bid for the chairmanship. — Bianca Quilantan CYBERSECURITY Tough times for Biden's cyber priorities: The Biden administration’s major cybersecurity priorities are in serious danger with Republicans taking control of the House . Congress has spent years passing bipartisan cybersecurity bills that have restructured government agencies and given them new authorities, but conservative lawmakers skeptical of the president’s push for new regulatory powers and expanded federal funding are likely to end that trend.   Biden recently said that his administration “looks forward to working with the Congress to fill gaps in statutory authorities to ensure our critical infrastructure is protected from cyberattacks,” but there is little prospect that Republicans will embrace the White House’s legislative proposals, which include a push to let the EPA more tightly regulate water utilities. Republicans are generally more sympathetic to the business groups calling for voluntary guidelines than to the security experts who argue that years of hands-off arrangements have increased hacking risks.   Much will depend on who wins the chair role of the House Homeland Security Committee, the most important panel in the lower chamber when it comes to cybersecurity issues such as protecting critical infrastructure. All three contenders have said they intend to prioritize border security and immigration, in a departure from the approach pursued by ranking member Republican John Katko (N.Y.).   Republicans are also likely to look skeptically on White House requests to boost the budget of CISA , the government’s lead cyber defense agency. Congress has given CISA several major new responsibilities since creating the agency in 2018, including overseeing a cyber incident reporting mandate for critical infrastructure firms. Democrats have tended to favor large funding increases for the agency, while some Republicans have argued that the agency is growing too quickly. — Eric Geller DEFENSE Defense dollars on the agenda: The Pentagon already saw monumental increases above what Biden requested with his own party controlling Congress. With Republicans taking over the House, expect a continued emphasis on growing military spending to outmatch China, Russia and high inflation.   But the road to even bigger defense budgets has plenty of twists and turns. GOP leaders will need to tame their conservative faction that wants to cut spending to shrink the deficit.   Defense increases could also be at risk if the Democratic-led Congress punts government funding into next year, a move that Defense Secretary Lloyd Austin warned is already costing the Pentagon several billion dollars in each month.   A GOP House is likely to take aim at a number of Pentagon personnel issues they've labeled “woke” and claim is distracting leaders from fighting the nation’s wars. Expect Republicans to challenge the Pentagon’s abortion access policy, climate change efforts, vaccine mandate and diversity and anti-extremism efforts in hearings and through legislation. — Connor O'Brien ENERGY Republicans plan energy permitting legislation: Republicans are pledging to embark on a legislative push next year that's focused on speeding up energy infrastructure permitting.   The GOP is advocating for wholesale reform of environmental laws and reduced exposure to lawsuits over permits to build pipelines, a more expansive set of changes than those pushed by Democratic Sen. Joe Manchin (W.Va.) last summer.   More broadly, the House GOP is signaling they don’t plan to make climate action a priority, and instead aim to focus on natural resources, with a focus on potential bipartisan issues like exploring solutions to the Western drought crisis.   Lawmakers in both parties are also eyeing the pending reauthorization of the farm bill next year as an opportunity to advance policies to encourage climate-friendly farming practices, such as boosting carbon sequestration. — Josh Siegel TAX Some agreement, lots of arguing: In terms of tax legislation, there could be some areas of bipartisan agreement — especially if lawmakers don’t get much done during the lame duck.   If they don’t move this year to undo new restrictions on big companies’ ability to deduct research and development expenses, demands to act next year will only get louder. Likewise, they will face growing calls to act on a hodgepodge of tax “extenders” as well as a bipartisan package of retirement incentives.   There’s been bipartisan concern over the vulnerability of business supply chains, an issue highlighted during the pandemic, and lawmakers could potentially agree on new incentives to move production lines to the U.S. from abroad.   Republicans are promising a lot more oversight of the IRS when they take over the House in January, something that’s likely to crescendo as the next tax season nears and the Treasury Department prepares a much anticipated report due in February on how it intends to spend $80 billion Democrats recently gave the IRS. That’s sure to mean a lot of pointed questions for the administration’s pick to run the IRS, Danny Werfel, who likely won’t be confirmed by the Senate until next year.   Expect a lot of tangling over the future of Republicans’ 2017 tax cuts. A big chunk of that law expires at the end of 2025, and Republicans are already banging the drum for making those provisions permanent — something that would cost more than $3 trillion. — Brian Faler