October Washington D.C. Update

 

QUICK FIX

— With a potential government shutdown looming, school aid and federal education spending remain up in the air.   — Disputes over Ukraine arms funding will heat up in the coming weeks after lawmakers omitted the funding from their stopgap bill in a last-minute move to avoid a shutdown.   — The United Auto Workers are roughly one month into their strike. The economic repercussions have come relatively slowly, but the strike has potential to escalate at any moment.

AGRICULTURE — Farm bill future uncertain: Congress blew past the Sept. 30 expiration for the farm bill, a once-every-five-years, trillion-dollar piece of legislation that funds key programs, including federal nutrition assistance and the farm safety net. Before the House speaker blow-up, it was one of the few major pieces of legislation lawmakers expected to get done in a divided Congress.   Lawmakers previously said that they would not immediately pass an extension of the current legislation, leaving some programs without authorization or even without funding. Come December, lawmakers have said they’ll reauthorize the bill or pass an extension to avoid key programs running out of funding.   But the lack of a speaker will make everything, including the usually bipartisan farm bill, harder to finish. Lawmakers are still far apart on funding and policy fights over nutrition, commodity programs and where to devote the Inflation Reduction Act’s $20 billion in conservation and climate agriculture funds. — Marcia Brown

TRADE — Trade talks, dispute resolution on tap for fall: As we head into the fall, the U.S. energy sector still awaits the next step in its long-running complaint over Mexican energy policies, which threaten billions of dollars of U.S. investment south of the border. USTR has yet to take the long-awaited next step of asking for a dispute settlement panel to rule on the issue under the USMCA, fueling criticism from lawmakers.   — IPEF heats up: Officials from the Office of the U.S. Trade Representative and the Department of Commerce are leading an American delegation to travel to Kuala Lumpur, Malaysia, between Oct. 15-24 for the sixth negotiating round of the U.S-led Indo-Pacific Economic Framework, the Biden administration’s signature regional strategy.   Washington hopes to make progress with 13 other participating nations on the remaining trade, clean economy and fair economy pillars, which are expected to dive into contentious disagreements over market access, forced labor, the environment and the digital economy.   — Meanwhile, USTR Katherine Tai is hustling to hammer out a resolution over a dispute with the European Union over steel and aluminum before the self-imposed deadline of Oct. 31, as the transatlantic partners work to fend off a revival of their 2018-2021 trade war at the end of this year. The two sides could announce a deal when President Joe Biden hosts European Commission President Ursula von der Leyen at the White House on Oct. 20.   — What you won’t see: Don’t expect much action on unfinished business, from the Generalized System of Preferences to the Miscellaneous Tariff Bill and Trade Adjustment Assistance, at least in the short term. — Ari Hawkins

EDUCATION — School aid threatened under potential shutdown: A potentially bumpy student loan payment restart is just one problem to watch as another government shutdown threat prepares to consume Capitol Hill while House Republicans try to coalesce around a budget plan and new leadership.   The stopgap budget measure that funded most federal agencies through Nov. 17 did not give the Education Department its desired flexibility to quickly spend administrative funding on the federal student loan program. That could mean more customer service cuts for borrowers in the coming months — though it’s not clear what the agency will trim. The department entered the 2024 fiscal year with significantly less carryover funding for student loan administration than normal.   — If that’s not enough uncertainty, Congress must still coalesce around a fiscal 2024 federal education spending plan. GOP-proposed cuts to schools serving low-income students would mean every congressional district loses tens of millions of dollars in federal support. Veteran Democratic appropriator Rep. Rosa DeLauro (D-Conn.) recently detailed how education funding cuts could affect each congressional district if House Republicans’ drafted Labor-HHS-Education bill were signed into law. GOP-proposed cuts to schools serving low-income students could mean districts lose tens —or hundreds — of millions of federal dollars, according to that analysis.   Until that fight is settled, schools and child care programs are left to prepare for a potential shutdown. Many Head Start programs for 3- and 4-year-olds would quickly pause. Some education groups are also concerned about a hiatus in the Impact Aid program, which funds the roughly 1,200 school districts on Native American reservations, military bases or places where the federal government owns land.   — The department has said a shutdown longer than one week would “severely curtail” cash flow to schools and other entities that depend on discretionary agency funds. Most Education Department grantmaking, civil rights investigations, guidance, technical assistance and regulatory actions would also pause. — Juan Perez Jr.

DEFENSE — On edge over Ukraine aid: A dispute over funding for arms to Ukraine will come to a head in the coming weeks after lawmakers left out money for Kyiv in a stopgap to prevent a government shutdown.   Despite bipartisan support for continued assistance to the country, Republicans have sidestepped acting on a $24 billion emergency request President Joe Biden sent lawmakers in August.   Senate Majority Leader Chuck Schumer says he and Minority Leader Mitch McConnell plan to work on a new aid package that could ramp up pressure on the House to act.   The fate of Ukraine aid will also likely hinge on who Republicans select to replace Rep. Kevin McCarthy (R-Calif.) as speaker. Majority Whip Steve Scalise is seen as more amenable to Ukraine aid, voting for most packages, while House Judiciary Chair Jim Jordan (R-Ohio) has long opposed it.   — Meanwhile, leaders of the House and Senate Armed Services committees are working to hammer out a compromise version of the National Defense Authorization Act, with an aggressive goal of finishing their work by Thanksgiving.   Democrats and Republicans are sounding an optimistic note, but it’s a narrow window to reconcile the two chambers’ radically different bills. Limits on abortion access, diversity programs and medical treatment for transgender troops supported by House Republicans will be the biggest partisan hurdles for negotiators. — Connor O’Brien

EMPLOYMENT AND IMMIGRATION — On the picket lines: The constant threat of an escalation of the United Auto Workers’ strike on Detroit auto companies looms as the union has taken a gradual approach to plant walkouts. Led by new President Shawn Fain, the UAW is fighting for major pay raises against the backdrop of the Biden-championed electric vehicle transition, which the union frets could leave good-paying auto jobs behind.   President Joe Biden has shown historic support for the striking workers despite the political tension around the transition.   Because Fain has so far used an unconventional tactic of ordering a few plants to walk out at a time across all three companies, the economic disruption of the weeks-old strike has come at a relatively slow burn. But it could ratchet up drastically at any moment.   — In the pipeline: The Labor Department’s rulemaking on who can be classified as an independent contractor is heading into the home stretch, after the department in late September completed one of the final steps in the process. The forthcoming regulation is expected in the not-too-distant future, though that timeline could be affected by a potential government shutdown later this fall.   — Acting Labor Secretary Julie Su’s nomination to her position has technically been pending for more than 200 days; however, she recently prevailed against a Republican challenge to her leadership via a Government Accountability Office ruling. It would give the DOL a powerful counter to any potential challenges of the independent contractor rule or other coming regulations based on Su’s acting status. — Olivia Olander

HEALTH CARE — A not-so-clear path for expired programs: The deal to keep the government running kept health care agencies’ doors open, but it didn’t address several programs lawmakers hoped to extend.   Despite averting a government shutdown, Congress let key health programs expire, including the SUPPORT Act tackling the opioid epidemic, the U.S. President’s Emergency Plan for AIDS Relief known as PEPFAR and the Pandemic and All-Hazards Preparedness Act.   Lawmakers could try to reauthorize the programs in a potential spending deal ahead of a Nov. 17 deadline to fund the federal government, but the specific path forward isn’t yet apparent. It’s unclear what the immediate practical consequences will be.   — PEPFAR has become embroiled in the fight over abortion. PEPFAR funds will continue because the government has remained funded, but there’s no clear path for reauthorization.   Senate Foreign Relations Chair Ben Cardin (D-Md.) is pushing for a five-year renewal, though some Republicans have wanted a one-year funding patch. Former President George W. Bush has tried to protect the program he helped craft in 2003, which has been credited with saving 25 million lives.   The program will continue to be funded, but supporters fear that without long-term funding, groups fighting HIV and AIDS worldwide will struggle to hire staff and launch long-term projects.   —The SUPPORT Act, a 2018 law, funded opioid use disorder prevention, recovery and treatment. The House Judiciary Committee recently approved its SUPPORT Act reauthorization bill with an amendment to schedule the horse sedative known as tranq to Schedule III for three years as opposed to permanently — which the Energy and Commerce Committee’s version did.   Funding for the act’s programs will continue, but lawmakers must pass a reauthorization bill to make changes, like rescheduling tranq. Some Medicaid plan options allowing for residential treatment for substance use disorder also expired, leaving states searching for funding elsewhere.   — PAHPA, the more-than-16-year-old pandemic and emergency preparedness law, also saw most of its programs expire.   The legislation historically has been bipartisan, but the Republican-controlled House advanced a smaller package than the Democratic-controlled Senate did, setting up a showdown between the two versions. — Health Care Team

TAX — Lots in limbo in tax land: With the continuing resolution keeping the government funded until mid-November, Democrats and Republicans still have to come to an agreement on annual appropriations for the IRS. Senate Democrats proposed keeping the agency’s funding at last year’s enacted level of $12.3 billion, while House Republicans want to slash the agency’s budget to $11.2 billion.   Meanwhile, House Ways and Means Chair Jason Smith (R-Mo.) has struggled to bring a GOP tax package to the floor over objections from New York, New Jersey and California GOP lawmakers that it should include some sort of state and local tax relief.   — But over in the Senate, there are signs of movement on negotiations involving two high-priority tax items: the expanded child tax credit and a restoration of immediate research and development deductions for businesses.   Democrats have insisted that there should be no R&D relief for businesses without the enhanced family credit. That ultimatum produced a stalemate in talks at the end of last year. But some senators indicate interest in a potential compromise involving a tailored version of the expanded CTC that is proportional to the amount of business relief included in a final package.   — Other business tax provisions that could come into play include bonus depreciation and greater allowances for debt interest deductions.   A critical player to watch here may be Sen. Maggie Hassan (D-N.H.), who has spearheaded R&D legislation along with Sen. Todd Young (R-Ind.) and recently expressed interest in helping broker a compromise.   Major CTC advocates like Sens. Cory Booker (D-N.J.), Michael Bennet (D-Colo.) and Sherrod Brown (D-Ohio) will also likely be involved in discussions, as will Finance Chair Ron Wyden (D-Ore.) — who has had ongoing conversations with Jason Smith over the contours of a potential end-of-year tax bill. — Benjamin Guggenheim

CANNABIS — Cannabis banking bill remains in limbo: The top priority for the cannabis industry remains the same as it has been for years: passage of legislation that would make it easier for state-legal weed businesses to access banking services. Recent developments on Capitol Hill have both fostered hope that the SAFER Banking Act is making headway and highlighted additional problems that must be overcome to get it to President Joe Biden’s desk.   Last month, the Senate Banking Committee approved the bill on a bipartisan 14-9 vote. But that momentum was almost immediately quelled by a feud over a set of protections for businesses like gun sellers and other controversial industries GOP lawmakers say face unfair scrutiny under Democratic administrations.   The cannabis banking bill’s uncertain path forward in the House — which previously passed the bill a half dozen times when Democrats were in control — has been further exacerbated by the chamber’s leadership upheaval with the ouster of Speaker Kevin McCarthy. — Paul Demko

FINANCIAL SERVICES — Gensler’s big agenda: Wall Street and corporate America are bracing for the release of controversial rules from the Securities and Exchange Commission covering everything from climate risk disclosures to a Treasury market overhaul.   While the SEC’s hard-charging Chair Gary Gensler has repeatedly insisted that the “clock” is not driving the agency’s work, the regulator is expected to turn out several rules before year-end. Delays might happen, of course, including the potential government shutdown in November, which would put a halt to any rulemaking work. But pressure is mounting — especially from lawmakers like Sen. Elizabeth Warren (D-Mass.), who are itching to see the SEC’s final climate risk disclosure rule, first proposed in March 2022.   Investors have been pressing for more information from public companies related to climate risk, while business groups are fiercely opposed, saying the agency is going far beyond its mandate and threatening lawsuits. The landmark proposal would require companies to divulge details about their carbon footprint and the risks their businesses face from the changing climate.   — The SEC’s plan to force more trading in the $25 trillion Treasury market through clearinghouses could also be up for finalization before year-end. Rolled out a year ago, the proposal is designed to promote central clearing in the market — a move that Gensler says will reduce risk.   — Credit card fees: The Consumer Financial Protection Bureau is expected to finalize a rule that would limit the late fees credit card companies can charge. The proposal the agency released in February would cap fees for a missed payment at $8 from the current level of up to $41 and ban late fee amounts over 25 percent of the borrower’s minimum payment.   The proposal — which President Joe Biden highlighted in his State of the Union address, reflecting the importance the administration is giving to the effort — sparked ferocious pushback from the banking industry. Banking lobbyists say the rule would ultimately reduce access to credit and lead to higher costs for users who pay their bills on time as credit card issuers hike other fees and interest rates in response. — Declan Harty and Katy O’Donnell