April Washington D.C. Update

QUICK FIX

— Three major health care-related issues will garner a lot of attention in Washington and beyond in the coming months.   — The Biden administration has a suite of higher education rules on its regulatory agenda this spring laying out plans on college affordability and protections against sex discrimination.   — EPA is slated to have a busy spring as the agency tries to advance multiple key rulemakings — with agency officials keeping one eye on the clock ahead of the 2024 election.

AGRICULTURE Ag regulators have their plates full:   — Rulemakings: The Agriculture Department’s third rule to juice competition in agricultural markets is expected later this year, maybe as soon as this summer. The agency is expected to finalize rules intended to make contracts between poultry growers and processing companies fairer and strengthen an agricultural antitrust law in the spring, but the timeline could get pushed back.   — Congress may have the last word on the competition rules; lawmakers have previously blocked similar rules and some Republicans appear interested in an encore. Relatedly, after publishing a report on competition in the market for seeds, USDA plans to hire a Farmer Seed Liaison to lead the department’s efforts. The department has also proposed updates to the Special Supplemental Nutrition Program for Infants, Women and Children, also known as WIC, but faced swift backlash from the dairy industry. The Senate voted to overturn the administration’s proposed rule defining Waters of the United States, as established in the Clean Water Act. The president is expected to veto the bill, but WOTUS may be transformed again when the Supreme Court rules in a case covering the Clean Water Act later this year.   – USDA: Agriculture Secretary Tom Vilsack has been on Capitol Hill repeatedly to defend USDA’s budget request, asking for more money for the chemicals known as PFAS research and relief, for worker compensation and to defend the federal nutrition programs. One of his main arguments is that USDA’s budget boost is needed to continue the department’s key efforts to expand market opportunities, bolster on-farm income and help farmers respond to climate change.   — FDA: The Food and Drug Administration’s plan for the reorganization of its human foods programs is under intense scrutiny by lawmakers. As POLITICO reported, the FDA was slow to respond to yet another outbreak of potentially lethal bacteria in infant formula. The beleaguered agency is asking for an increased budget, but it’s unclear if lawmakers will fulfill it without the FDA’s house in order. The FDA just gave a second company that makes cultivated or lab-grown meat the green light. USDA’s Food Safety and Inspection Service is expected to finalize labeling and other regulations that will allow companies’ products to hit shelves later this year. – Marcia Brown

HEALTH CARE Three major health care-related decisions loom in Washington: Each will garner a lot of attention in Washington and beyond in the coming months.   — The more than 3-year-old Covid-19 public health emergency will end on May 11, the White House said. Many government regulations and rules relaxed during the pandemic will return to normal, and the impact will be felt by nearly everyone — from small businesses to corporate America in just about every industry, but especially by those who receive or provide health care. The Biden administration is also considering a plan to keep Covid vaccines, treatments and tests free for the uninsured, allaying fears that the most vulnerable Americans could be left without access to Covid care once the government exhausts its ability to purchase vaccines and treatments and shifts responsibility for distributing them to the private market.   — The FDA is expected to unveil its long-awaited nationwide ban on menthol cigarettes in August. The regulation will be closely scrutinized for how it defines menthol as well as how the government plans to enforce the ban. On that point, lawmakers have raised concerns because some 40 percent of cigarettes sold in the U.S. are menthol, and people of color, by far, are the main consumers. In California, which banned menthol cigarettes in December, some tobacco companies seem to have already found a way to circumvent the ban with new nonmenthol (but tastes like menthol) products.   — Meetings between drugmakers and Medicare and FDA officials are underway to implement the provision of the Inflation Reduction Act that kicks off the first drug-price negotiations in the U.S. Medicare has pledged to have a list of the first 10 drugs by Sept. 1, but details on how those drugs will be chosen are being hashed out. Pharma companies are deep into strategizing how they can affect that list, with some lobbyists and legal experts even predicting that the timing of new drug application filings to the FDA could be impacted so approvals maximize the seven-year (drugs) and 11-year (biologics) exclusion from being selected for the Medicare list. – Beth Belton

EDUCATION Big rules focused on college costs, discrimination: The Biden administration has a suite of higher education rules on its regulatory agenda this spring laying out plans for protections against sex discrimination and college affordability.   — The Education Department is expected to finalize its rule on Title IX, which would codify protections for sexual orientation and gender identity, sometime in May. The finalized rule would define sex-based harassment and establish clearer protections for pregnant students in a post-Roe legal landscape, among other things. Separately, the department is considering a proposed rule on Title IX specifically codifying protections against discrimination in athletics, with a draft of the proposed rule imminent that is certain to attract Republican ire.   — On the financial side, a final rule that would make the system for repaying federal student loan debt more generous for borrowers is expected in the coming months. Education Secretary Miguel Cardona unveiled the agency’s proposed income-driven repayment plan earlier this year — something CBO slapped a $230 billion (over 11 fiscal years) price tag on. The agency is also expected to propose a regulation in April that would effectively revive an Obama-era policy targeting for-profit colleges. Reverting the gainful employment rule to its earlier iteration would cut off federal funding to career college programs, including those at for-profit schools, that left graduates with a mountain of debt relative to their earnings. – Mackenzie Wilkes

ENERGY EPA’s jampacked spring agenda: EPA is slated to have a busy spring as the agency tries to advance multiple key rulemakings — with agency officials keeping one eye on the clock ahead of the 2024 election.   — Environmentalists are eagerly awaiting EPA’s new climate rule for power plants — its third effort and one that will have to respect the Supreme Court's guardrails. But a proposal has yet to land at the White House for review. An update to an Obama-era standard for newly built power plants is also expected and will likely squeeze more reductions out of future gas-fired plants.   — EPA is expected to propose strengthening its air toxics rule for power plants in the coming months, known as the Mercury and Air Toxics Standards.   — EPA and the Transportation Department are both hard at work on the next phase of tailpipe regulations. The White House is currently reviewing EPA’s proposal that will cover both greenhouse gases and conventional pollutants for model year 2027 through at least 2030, and possibly later. But DOT has not yet advanced its companion rule covering fuel economy.   — EPA has sent the White House a draft proposal targeting greenhouse gas emissions from the heavy-duty truck sector for 2027 and beyond. The agency recently blessed a California regulation that will require manufacturers to transition to significantly more zero-emissions trucks in the next decade.   — In the coming weeks, EPA is poised to propose new restrictions on a long-running environmental justice problem: ethylene oxide. The gas is used to sterilize medical equipment and make other chemicals, but leaky facilities have created cancer concerns in communities around the country. The White House recently finished reviewing updated rules for commercial sterilizers and chemical manufacturers.   — On water, EPA continues to wait for the Supreme Court to rule on federal jurisdiction — aka Waters of the U.S. It’s not clear exactly what test the justices may cook up, but with a more conservative bench, it’s probably not going to be great for the Biden administration. A ruling is expected by June but could come earlier. A judge recently blocked the WOTUS rule but just in Texas and Idaho (though more states could get relief as other lawsuits wind their way through the courts). – Alex Guillen

CANNABIS Hemp industry eyes farm bill for regulatory clarity: Legal uncertainty has clouded the market for hemp-derived products ever since the crop was legalized under the 2018 farm bill, with industry officials clamoring for clearer guidance from the FDA.   — In January, the agency finally provided some clarity about its stance: CBD products won’t be regulated like dietary supplements — as many industry officials and some lawmakers had been pushing for. Instead, the FDA said it intends to work with Congress to create an entirely new regulatory pathway for hemp-derived products. That was disappointing news for hemp industry officials and their allies, but it also provides greater clarity on the path forward. They’re now focused on the 2023 farm bill as an opportunity to provide clear regulatory guardrails to boost the fledgling industry. That could open up the market for CBD drinks and beverages to major retailers that have largely shunned those products due to their murky legal status. – Paul Demko

TAX Congress left the hard work to Treasury on tax laws in the Inflation Reduction Act:   — Since the enactment of the Inflation Reduction Act last August, the Treasury department has had its hands full developing regulations for the slew of clean energy tax credits and corporate taxes included in the legislation’s climate spending and revenue-raising provisions. Tax credits for energy-efficient homes and electric vehicles are just some green incentives the Treasury has already weighed in on, although stakeholders will have an opportunity to provide the department comments before it issues final regulations.   — A far more complex undertaking for Treasury will be to fill in the gaps left by Congress in the implementation of new 15 percent minimum tax levied on companies making more than $1 billion. Among the questions business groups are pressing Treasury to answer with forthcoming regulations is whether unrealized gains and dividends from foreign corporations to U.S. shareholders will be included in companies’ financial statement income used to calculate the tax. Those groups have also expressed concern about how partnerships are treated under the minimum tax, which takes effect for the first time beginning this year.   — Keep a watch as well for guidance pertaining to the Inflation Reduction Act’s new tax on stock buybacks, as well as regulations fleshing out the tax treatment of cryptocurrency brokers and digital collectibles known as NFTs. The IRS said late last year that it was kicking the can down the road on implementing new crypto reporting requirements until the Treasury issues final regulations. – Benjamin Guggenheim

DEFENSE Congress drills down on the budget: Top Pentagon officials — led by Defense Secretary Lloyd Austin, Joint Chiefs Chair Gen. Mark Milley and the heads of each of the military services — spent much of March crisscrossing Capitol Hill to make a case for the administration’s defense budget. With most of those hearings behind them, Congress will soon turn to legislate. Many defense hawks have aired their opposition to President Joe Biden’s $842 billion Pentagon budget. Leaders of the House and Senate Armed Services panels will likely support another boost to military spending when they advance their defense policy bills this spring. But it’s still unclear when the new House GOP majority will land on the issue. Speaker Kevin McCarthy is caught between defense hawks pushing for substantial spending increases and fiscal conservatives who want to see spending cut. Even keeping defense steady or at the level, Biden sought may cost him considerable support in the GOP for a budget blueprint and in spending bills. In crafting Pentagon policy and spending bills, lawmakers will also be guided by wish lists of priorities that didn’t make the cut for the budget request. The military services submitted lists to Congress totaling nearly $11 billion. – Connor O'Brien

TRADE China tops the spring trade policy agenda: The biggest trade developments expected in the second quarter revolve around China.   — The Biden administration is pushing to finish an executive order on oversight for U.S. investments in China – the first time the government would exert such authority over U.S. businesses overseas. The administration has recently scaled back that order to focus on gathering information on U.S. investments rather than issuing new regulations, and Congress is also debating action of its own. The executive order, delayed for months, is now expected sometime in April.   Issuing the outbound investment order could allow the administration to move on to other aspects of the U.S.-China relationship, like a long-rumored executive order regulating the ability of foreign companies to collect data from American citizens. But that order, debated for over a year, has been held up by another impasse — how to handle TikTok. The administration has been deadlocked on that issue since last year and recently threw its support behind new legislation that would give it more tools to handle foreign-owned apps.   — The U.S. Trade Representative's office is also continuing its review of the Trump-era tariffs on China, but the agency has given no indication of whether it may conclude that investigation in the coming months.   Spring meetings: Allies will have plenty of opportunity for input as the administration weighs those issues.   — Japan will host the G-7 trade ministers in early April and then Biden for the G-7 summit in mid-May. U.S. Trade Representative Katherine Tai will host trade ministers from the Asia-Pacific Economic Cooperation group in May in Detroit.   — The U.S.-EU Trade and Technology Council will hold another round of meetings on May 30-31 in Luleå, a small town in northern Sweden.   — And look out for the U.S. to reschedule trips to China for Secretary of State Tony Blinken and Treasury Secretary Janet Yellen after the balloon incident postponed their visits earlier this year. – Gavin Bade

FINANCIAL SERVICES — Scope 3’s survival: In the coming months, the Securities and Exchange Commission is expected to finalize a proposal that would force U.S.-listed public companies to start disclosing to investors the climate risk they’re facing. How far those disclosure requirements will go is one of the biggest questions for what is already the most widely watched SEC rule in years. For Wall Street investors, progressive lawmakers like Sen. Elizabeth Warren (D-Mass.) and environmental advocates, the farther, the better — including Scope 3 emission data that tracks the greenhouse gas emissions of a company’s vast network of suppliers and customers.   — Cracking crypto: Since the collapse of FTX, the one-time cryptocurrency exchange giant that went belly up in late 2022, the SEC and the Commodity Futures Trading Commission have dialed up their policing of the largely untamed $1 trillion market by going after juggernauts like Binance and Coinbase. Don’t expect them to ease up. Lawmakers are still sifting through the recent banking turmoil while other fires like the government’s looming debt ceiling rage on — leaving little time for Congress to pursue legislation that would provide the regulatory clarity the crypto industry craves.   — Junking the junk fees: The Biden administration is stepping up its campaign to reduce so-called junk fees such as those involving bank overdrafts and credit card bills. The Consumer Financial Protection Bureau is expected to propose a rule reining in bank overdraft fees in the coming months. The bureau proposed a rule in February to curb credit card late fees — a proposal that Biden highlighted in his State of the Union address — and hinted that further action was in the offing. Banks have pushed back strongly on the campaign.   — Fair housing: The Department of Housing and Urban Development will move forward with tweaks to its new Affirmatively Furthering Fair Housing rule — a plan to fully carry out the promise of the landmark 1968 Fair Housing Act — with public comments on the proposed rule due April 10. The rule has proved a partisan lightning rod, with Republicans objecting to the cost and the imposition of federal restrictions on local zoning decisions. The Trump administration suspended the original Obama-era rule in 2018 before discarding it altogether in the summer of 2020 as then-President Donald Trump accused Democrats of trying to “abolish the suburbs.”   — Home loans: The Federal Housing Finance Agency will wrap up its comprehensive review of the Federal Home Loan Bank System after holding its final roundtable on the system in March. The 11 regional government-chartered FHLBs provide loans to their roughly 6,600 members, including commercial banks and insurers. The review, launched last year, has taken on new urgency as FHLB loans to wobbly crypto-friendly lenders came to light amid the recent banking crisis, raising questions about how the agency was spending its money. Agency Director Sandra Thompson is expected to report recommendations from the review to Congress in the coming months. – Declan Harty and Katy O'Donnell