February Washington D.C. Preview

QUICK FIX

— A divided Congress for the first time in Biden’s presidency will bring tougher negotiations on his big-ticket items like student debt and boosting funding for Medicare.   — Trade action in the budget will likely focus on bringing more jobs home — and isolating China — rather than increasing exports abroad.   — The president is likely to seek a boost in military funding, though probably not enough for defense hawks on the Hill.

BUDGET AND APPROPRIATIONS Biden readies his budget: The Biden administration will spend this month putting the finishing touches on the president’s third budget request, set to debut March 9.   As the two parties begin negotiations over the debt limit — and fiscal trade offs some Republicans are demanding — Biden will use his budget to highlight his support for expanding entitlement programs like Medicare and Social Security. Biden is also expected to request hearty increases in both non-defense and military spending for the upcoming fiscal year, as he faces GOP pressure to hack spending levels to totals enacted a year ago.   The White House has promised this year’s budget will make a lot more sense than last year, when the request used old funding levels as comparisons since the spending package was so late. The request will include “tables and numbers showing exactly how” the president’s “economic and fiscal policies add up,” Biden’s top budget officials have assured lawmakers.   In laying out his funding proposals for the fiscal year that starts Oct. 1, Biden is also expected to outline more plans to lower costs as inflation continues to stress household budgets. — Jennifer Scholtes

AGRICULTURE Boosting the rural economy: The White House and Democrats in Congress have successfully pursued billions of dollars in funding increases for agriculture-related climate programs and rural development since Biden took office — arguing investing in rural communities is the best way to build trust with rural voters and stimulate lasting economic growth. In 2022, the USDA rural development budget received a boost of $8 billion dollars, a 19 percent increase from the previous fiscal year.   Biden, as part of the White House Conference on Hunger, Nutrition and Health last fall, also called for new funding increases for federal nutrition programs. Additional food assistance funding will be key for families amid higher food prices and as emergency pandemic SNAP benefits end this month, even as House Republicans are eyeing slashing that same pot of money in the upcoming debt limit fight. — Meredith Lee Hill

HEALTH CARE Biden’s budget could defend Medicare and Medicaid: Biden’s budget will help set the stage for the debt ceiling fight later this year, and it’s notable that the White House is already hammering home its desire to protect the politically popular Medicare program even as Republicans vow not to cut it.   “The budget will show how the President plans to invest in America, continue to lower costs for families, protect and strengthen Social Security and Medicare, and reduce the deficit,” National Economic Council Director Brian Deese and Office of Management and Budget Director Shalanda Young wrote in a memo.   Republicans have been more reticent about possible cuts to Medicaid, a program that conservatives have long hoped to curb. The White House could look to set up a contrast by promoting Medicaid and offering more funding for mental health services, workforce development, substance abuse services, community-based clinics and other areas that have traditionally drawn bipartisan support.   This will also be the White House’s first budget since the Supreme Court overturned Roe v. Wade and one way the president can address the issue is with a huge boost in funding for Title X programs. In last year’s budget the president proposed boosting funding for Title X programs from $286 million to $400 million.   Cancer research is also a top priority for the Biden administration and the president has often talked about his cancer moonshot and his hopes for the Advanced Research Projects Agency for Health. POLITICO recently reported that the Biden administration tapped Barbara Menard to lead the new agency’s congressional relations team. For nearly a decade, Menard worked at the Office of Management and Budget, leading a branch that deals with health and social programs. Before that, she worked at the Centers for Disease Control and Prevention, representing the agency before Congress and federal agencies.   The Biden administration announced it is ready to end the Covid-19 public health emergency in May, and it is unlikely Republicans would agree to any significant new funding for pandemic preparedness. Still, there is likely to be a push for some fresh funding both for domestic preparedness and to help allies overseas still struggling with the virus. — Dan Goldberg

EDUCATION What to watch on education funding: Biden’s big-ticket education spending items — such as significantly increasing federal funding for low-income schools under Title I, special education money, universal pre-K and free community college — are off the table as House Republicans push for a more austere federal spending plan.   Biden’s budget could highlight those major education plans again. But the administration will have to eventually reach a bipartisan compromise on spending to fund education programs and the rest of the budget beyond October. One possible area for agreement might be on expanding Pell grants for short-term programs, which has had bipartisan support in both chambers, though some of the details need to be hammered out.   — Student aid funding: The year-end spending bill that passed in December level-funded the Education Department’s student aid office, which plays a key role in implementing Biden’s student loan agenda. The administration had been seeking a major boost in the funding to accommodate its wide range of programs, including debt cancellation. But Republicans and Democrats couldn’t reach an agreement on increasing the funding, negotiations that are sure to get more difficult this year with GOP lawmakers in control of the House. — Michael Stratford

DEFENSE Spending battle brewing: The Biden administration is likely to seek another increase in military spending, which topped out at $858 billion this year. But if his previous two budgets are any indication, it's unlikely to be enough for defense hawks on Capitol Hill who have pushed for tens of billions more than Biden sought. Republicans have a fraught path to boosting defense funding again, though, as conservative budget hawks push to slash spending.   Beneath the topline figure, potential flashpoints in Biden's defense budget include funding to deter China, shore up Ukraine's defenses, boost the number of ships in the Navy and ramp up the industrial base. — Connor O'Brien

TRADE Keeping China in check: With the Biden administration steadfastly adhering to its yearlong moratorium on new foreign economic deals, the trade action in the budget will be more about bringing jobs home — and isolating China — than increasing exports abroad.   Much of that funding will come through implementation of the Inflation Reduction Act’s tax credits for clean energy products, as well as the CHIPS Act’s funding for semiconductors. Look for how the Biden administration allocates money at the Treasury, Commerce and Energy departments for clues as to how it will roll those subsidies in the year to come.   Also, check those agencies — plus the departments of Defense and Homeland Security — for new funding for China initiatives. Last year’s budget proposal poured money into strategic initiatives across multiple agencies to combat China’s influence in the Indo-Pacific and international institutions. Expect those programs to multiply and be better funded as Washington's skepticism toward Beijing grows.   Some trade-adjacent initiatives with allied nations are also likely to get new funding proposals, as the Biden administration seeks to keep foreign capitals from drifting toward Beijing. That will likely include stepped up funding for international aid initiatives at the United Nations and other global institutions, which could help cushion any ongoing backlash to Biden’s reluctant global trade agenda. — Gavin Bade

EMPLOYMENT AND IMMIGRATION Defending the NLRB: The GOP takeover of the House likely extinguishes any Democratic hopes of bolstering the battery of agencies that police workplaces across the country.   Labor Secretary Marty Walsh frequently makes the case to boost funding so it can hire more investigators to look into allegations of safety violations and wage theft. Both are time consuming tasks that can mean a lot to a given worker, even though worker rights advocates argue that fines and penalties need to be substantially higher to serve as a deterrent in the first place.   Those arguments tend to fall flat with Republicans. But the biggest battleground may be over funding for the National Labor Relations Board, which got a $25 million increase as part of the omnibus.   That was millions less than what the Biden administration had sought, but it was the first boost for the agency in the better part of a decade and staved off potential furloughs this year.   But the NLRB has virtually no friends in the GOP and the agency’s pro-union direction under Biden’s appointees put a substantial target on it. — Nick Niedzwiadek

TAX Mission accomplished: With Democrats having already secured a whopping $80 billion windfall for the IRS in their Inflation Reduction Act last August, it’s unlikely that Biden will be asking for even more money for the agency.   Indeed, the omnibus package passed in December saw the IRS receive $12.3 billion in annual appropriations for fiscal year 2023, which was around the same amount the agency got for 2022. That came amid sharp criticism from Republicans that the new IRS funding would be used to go after small businesses and drastically increase audits on everyday taxpayers.   The infusion from Democrats’ climate, health and tax bill will be spread out over 10 years and include $45.7 billion for ramped-up tax enforcement, $25.3 billion for operations support and $4.8 billion for the modernization of the agency’s business systems. Treasury Secretary Janet Yellen has directed the IRS to provide a plan in February going into detail on the implementation of those funds.   Besides funding for the tax administration agency, keep your eye out for a wish list of taxes that Biden has previously proposed using to fund his agenda. Those could include the raising of the corporate tax rate from 21 to 28 percent, a so-called billionaire minimum tax on taxpayers worth $100 million or more and a 15 percent global minimum tax championed by the Organization for Economic Cooperation and Development. — Benjamin Guggenheim

CYBERSECURITY The impact of the upcoming national cyber strategy: For the third time in three years, the Biden Administration is expected to seek major cybersecurity investments in its fiscal 2024 budget request. And with the White House due to release its first national cybersecurity strategy in the coming days, there’s reason to think this could be the biggest year yet.   The culmination of a two-year review led by the new Office of the National Cyber Director, the strategy is expected to call for a fundamental change in the way the government oversees digital security, with a shift from a volunteer model emphasizing cooperation with private owners of national critical infrastructure to a carrot-and-sticks-type regulatory approach.   To make that vision a reality, the White House will likely urge significant new investments in the agencies that defend critical infrastructure sectors — like the departments of Energy, Health and Human Services and Homeland Security — and who will soon take on expanding cyber oversight duties.   Also expect the White House to call for more funding to secure the government’s own networks, something it has been pushing ever since the 2020 SolarWinds campaign exposed gaping holes in the feds’ digital defenses.   Finally, the administration will likely seek new outlays for the agencies and programs that lead the nation’s offensive and defensive cybersecurity work, among them the Cybersecurity and Infrastructure Agency, the FBI and the U.S. Cyber Command. — John Sakellariadis