June Washington D.C. Update

QUICK FIX

— Nearly four years after cannabis banking legislation initially passed the House with broad bipartisan support, the financially struggling weed industry is still waiting to get its top legislative priority enacted.   — Passage of the debt ceiling deal clears the way for the House and Senate to finally begin work on their annual defense policy bills in the coming weeks.

AGRICULTURE Farm Bill spring begins: Congress will be sprinting this summer to write the farm bill, the $1 trillion-plus legislative package passed every five years to authorize agriculture, nutrition, conservation and forestry programs.   — The aim is to pass the legislation by the end of September, although the recently resolved debt limit standoff has slowed some negotiations, which could delay final passage of this fall. Senate Agriculture Chair Debbie Stabenow (D-Mich.), however, is hopeful that the debt limit deal took one major farm bill flashpoint off the table — funding for the Supplemental Nutrition Assistance Program, a perennial target of Republicans. Stabenow told POLITICO last week that, from her perspective, Congress is “done” with any discussion around SNAP changes after the debt deal changed several of the program’s work requirement provisions.   — The aim is to pass the legislation by the end of September, although the recently resolved debt limit standoff has slowed some negotiations, which could delay final passage of this fall. Senate Agriculture Chair Debbie Stabenow (D-Mich.), however, is hopeful that the debt limit deal took one major farm bill flashpoint off the table — funding for the Supplemental Nutrition Assistance Program, a perennial target of Republicans. Stabenow told POLITICO last week that, from her perspective, Congress is “done” with any discussion around SNAP changes after the debt deal changed several of the program’s work requirement provisions.   — “What’s clear to me is once [the debt ceiling vote] is done, we are not revisiting it in the farm bill. This is it,” Stabenow said. That is putting the upper chamber on a collision course with the GOP-majority House — where some Republican hardliners are even more eager to push stricter SNAP work requirements after they felt the agreement “watered down” their original bill.   — McCarthy, in his speech Wednesday night celebrating the passage of the debt bill, appeared to gear his GOP hardliners up for a bruising farm bill battle over SNAP. “Let’s get the rest of the work requirements,” McCarthy said. The top Republicans on the Agriculture Committees don’t expect the spending caps included in the debt ceiling deal to impact the farm bill’s bottom line, however.   — Under the deal, nondefense spending will remain largely static through fiscal year 2024 then tick up by 1 percent in fiscal year 2025. And lawmakers need to pass all 12 annual appropriations bills by the end of January or face a 1 percent cut in spending. The farm bill will likely be shielded from caps and cuts due to the nature of the funding targeted by the debt limit bill. The bill aims to cap discretionary funding — money Congress appropriates yearly through the 12 appropriations bills.   — By contrast, the farm bill is mostly made up of mandatory spending — money Congress delegates over longer periods that is largely not impacted by annual appropriations. However, that doesn’t mean agricultural programs will not see any impact from the debt limit deal. Industry groups typically ask for money outside of the farm bill in the appropriations bills, which will now be capped. That cap will put a squeeze on what lawmakers are able to spend on those programs.   — But the new spending caps could also hit discretionary programs like the Special Supplemental Nutrition Program for Women, Infants, and Children, better known as WIC. Rep. Rosa DeLauro (D-Conn.), the top Democrat on the House Appropriations Committee, told POLITICO the agreement will impact the amount appropriators have to spend. “It’s been decreased below 2023 by at least a billion dollars and potentially more,” DeLauro said. “So that means you’re dealing with cuts.” — Emily Cadei, Meredith Lee Hill, Garrett Downs

CANNABIS GOP’s unease with weed clouds cannabis banking prospects: Nearly four years after cannabis banking legislation initially passed the House with broad bipartisan support, the financially struggling weed industry is still waiting to get its top legislative priority enacted.   — The Senate Banking Committee held a hearing on the bill last month, sparking optimism that it might finally make some progress in the chamber. But the unexpected demise of a seemingly noncontroversial veterans cannabis research bill — which was doomed by GOP opposition — has clouded the prospects for passing any weed bills on Capitol Hill.   — And the likelihood that the Republican-controlled House will take up the bill remains difficult to gauge, although cannabis banking champion Rep. Dave Joyce (R-Ohio) is a key ally of Speaker Kevin McCarthy. — Paul Demko

DEFENSE Defense plans come into view: Passage of the debt ceiling deal clears the way for the House and Senate to finally begin work on their annual defense policy bills in the coming weeks.   — The House and Senate Armed Services Committees plan to mark up their versions of the National Defense Authorization Act the week of June 19. The process on both sides of Capitol Hill was slated to kick off in May but was sidelined amid the debt fight.   — House and Senate Appropriators won’t be far behind in crafting bills to fund the Pentagon. Lawmakers tasked with writing and passing Pentagon policy and spending legislation got a big boost from the debt agreement, too. The deal caps defense spending at President Joe Biden’s budget level of $886 billion for the coming fiscal year, giving all committees a common framework for their bills.   — The budget deal isn’t the end of the story, however. Defense hawks are also set to seek a supplemental funding measure to pad the Pentagon budget and circumvent the caps. The most likely vehicle for that is another Ukraine aid package, which the administration may seek more money for in the summer or fall. — Connor O’Brien

EDUCATION Deadline for student debt repayment nears: Capitol Hill lawmakers have rebuked Biden’s student debt relief plans, but they can expect their attempt to overturn a signature White House policy measure to be rendered symbolic in the face of a promised White House veto.   — A group of moderate Senate Democrats joined the upper chamber’s Republicans on June 1 to pass legislation that would have overturned Biden’s plan to cancel up to $20,000 of student debt relief for tens of millions of borrowers, roughly one week after the House signed off. Neither the House nor Senate passed the measure with the two-thirds majority that would be needed to override Biden’s veto.   — Borrowers still need to spend the summer planning for tighter budgets. Loan repayments are set to resume after Aug. 30, thanks to a debt ceiling deal that terminates the Education Department’s suspension of student loan payments and interest, which started more than three years ago. Then there’s the Supreme Court. Justices could also issue a ruling on the fate of Biden’s loan plan as early as June 8. — Juan Perez Jr.

ENERGY Biden’s water woes: The Biden administration is scrambling to rebuild an environmental permitting regime after the Supreme Court in late May dramatically narrowed the scope of the Clean Water Act.   — The court’s decision in Sackett v. EPA cuts at least in half the number of wetlands regulated under the law and could be a major boon for a wide range of development projects, from mining to homebuilding to highway construction — once the agencies figure out how to implement it. So far, the Biden administration is holding its cards close to the vest. Legal experts expect the Environmental Protection Agency to issue some sort of implementation guidance that can be used in the near-term while federal lawyers decide what to do on the rulemaking front.   — The Biden administration in January finalized a rule cementing a broad scope to federal water protections, which will now likely need to be at least reworked, if not redone entirely. For now, the Army Corps of Engineers, which issues permits to fill in wetlands, has paused on-the-ground determinations of which streams fall under the scope of the water law, effectively freezing many development projects in their tracks. It’s unclear how long the freeze will persist. But the last time the Supreme Court issued a major ruling on the topic, EPA halted determinations for roughly a year. — Annie Snyder

HEALTH CARE Health care will be at the center of policy discussions in Washington this summer: from decisions about pharmacy benefit managers and new Covid boosters to drug price negotiations to Medicaid redetermination. In addition, the appropriations process should get rolling with hearings and committee markups.   — In the near term, Congress is focused on passing legislation that would require more transparency from pharmacy benefit managers and improved access for consumers to lower-priced generic drugs. The Senate’s markup of a package of bills to accomplish this was paused during the debt-ceiling drama. But the expectation is that the legislation will be put back on the front burner.   — Later this month, the Food and Drug Administration is expected to announce the Covid-19 strain that will be targeted in the newest boosters for the virus. And in July, the CDC is set to make decisions about the booster and the recently approved RSV vaccines for older adults and infants.   — The FSA will hold an advisory committee meeting on Leqembi, an Alzheimer's drug, on June 9 to hear independent experts weigh in on whether the drug should receive full approval from the agency. The FDA then has until July 6 to decide. There has been a recent flurry of advocacy from lawmakers and patient/caregiver groups about CMS' decision to cover the drug only if a patient is enrolled in a registry that keeps track of patient outcomes and side effects.   — The Centers for Medicare and Medicaid Services is expected to unveil on Sept. 1 its list of 10 brand-name drugs that will be part of the government’s negotiation with drugmakers as part of the Inflation Reduction Act. CMS is in the process of hiring about 100 analysts to help with the negotiations.   — CMS officials also are eyeing how states comb through their Medicaid rolls, aware that millions of people who remain eligible for Medicaid could get caught in bureaucratic blunders and lose their insurance. During the Covid-19 pandemic, states were not allowed to remove anyone from the Medicaid rolls, but that rule has expired, meaning states are determining eligibility for the first time. Some people who remain eligible, however, may fail to turn in the correct paperwork or may not realize what they are supposed to do. CMS has said it will report national redetermination numbers at some point this summer. — Eli Reyes

TAX On the tax agenda: Much of the tax world’s attention will be focused this summer on a tax package House Republicans are preparing to roll out.   — The package is expected to propose undoing recent restrictions on capital, interest and research expense breaks for businesses as well as sundry other provisions like one offering a tax cut to auto dealers who use so-called LIFO accounting. Democrats are likely to demand an expansion of the child tax credit in exchange, and a big question will be what that looks like, how big such a package would be and whether and how it will be paid for. That will be an extended debate, with lawmakers unlikely to seriously debate moving something until year’s end.   That won’t be the other thing worth watching in Congress.   — There are also the retaliatory measures House Republicans recently proposed targeting a global tax agreement with other OECD countries that the Biden administration brokered. It’s unclear whether or when the Ways and Means Committee will formally take those up.   — There could also be some action on tax treaties. The Senate Foreign Relations Committee recently approved a tax treaty with Chile, and many lawmakers would like to hammer out some sort of tax agreement with Taiwan, upon whom the U.S. is now relying to help build up its semiconductor industry. Without an agreement, Taiwanese companies can face sky-high tax bills.   — The tax prep industry can be counted on to fight an administration plan to roll out a pilot program next filing season that would allow people to electronically file their taxes with the IRS for free.   — On the regulatory front, the crypt industry is waiting for the Treasury Department to release long-gestating rules filling in the gaps of a tax crackdown on cryptocurrencies approved by Congress in 2021.   — Businesses meanwhile are fighting a plan by accounting regulators at Financial Accounting Standards Board to require companies to publicly disclose more information about their tax payments. — Brian Faler

TRADE Trade negotiations intensify: The Biden administration is still struggling to complete a deal with the EU on critical minerals that would make European automakers eligible for U.S. electric vehicle tax credits.   — The two sides had initially hoped to forge a pact by the end of May, but differences in how to frame the deal are slowing the final agreement. The European Union has been pressing for a more flexible agreement on the critical minerals used in electric car batteries that won’t require the time-consuming approval of its 27 member countries. But that doesn’t work for the Biden administration, which is under immense pressure from lawmakers to broker a binding pact.   — The U.S. wants Europe to make commitments that boost the supply of those minerals in exchange for the tax perks, which were part of the historic climate law Democrats passed last year. EU trade chief Valdis Dombrovskis insisted at a press conference in Sweden last week that Brussels was getting close to agreeing to a deal around critical raw materials with Washington, though a date had yet to be confirmed. Dombrovskis also expressed optimism that the U.S. and EU will conclude negotiations around a five-year trade dispute over steel and aluminum by October, as planned.   — Other countries hope to launch negotiations on critical minerals deals so they can access the U.S. EV tax credits. The Philippines, Malaysia and Indonesia are among the countries pressing U.S. trade officials to broker a critical minerals pact as part of ongoing negotiations over the Indo-Pacific Economic Framework, a trade initiative that the Biden administration launched last year with 13 other countries.   — The Commerce Department announced on May 27 that it had completed negotiations on the supply chain pillar of the Indo-Pacific Economic Framework, one of the four pillars in the pact. The supply chain agreement must still go through an approval process in each country.   — In the U.S., the deal will likely be treated as an executive agreement that will not involve legislative approval. The Biden administration is pushing ahead on negotiations on the other three pillars, which contain some of the pact’s more controversial provisions related to trade, clean energy and anticorruption and taxes. Officials hope to finish the full deal in time for Biden’s summit with Asia-Pacific leaders in San Francisco in November. — Emily Cadei, Steven Overly