February Washington D.C. Preview

QUICK FIX

— Content moderation is on the docket at the Supreme Court in late February, where it will hear oral arguments on two cases that could determine the future of how social media companies moderate content online.   — The SEC faces legal attacks from cryptocurrency giants, Wall Street and beyond, amid a possible move from House Republicans on crypto legislation in the coming months.   — The Education Department is moving forward with negotiated rulemaking aimed at higher education, which could determine rules on dining hall fees and undocumented student access to college prep programs.

TECHNOLOGY Commerce says buckle up: The Commerce Department warns of more enforcement of export controls and economic sanctions. Matthew Axelrod, the Commerce Department’s assistant secretary for export enforcement, said in mid-January that the U.S. is on the “cusp” of cracking down with steeper penalties for companies that violate export rules on China, Russia and Iran.   Congress will likely continue to discuss trade restrictions on semiconductors and other critical technologies. Hearings this month in both the House and Senate surfaced ideas on preventing advanced technologies from falling into the hands of the Chinese Communist Party and coordinating with allies on tech trade policies. Those comments gained urgency as recent reports indicate China has spent nearly $40 billion on chipmaking machinery to outpace American-led export controls, and Russia managed to import more than $1 billion of advanced U.S. and European chips last year despite Western sanctions following its two-year-old invasion of Ukraine.   — Content moderation at SCOTUS: The Supreme Court will hear oral arguments on Feb. 26 in two cases that could determine the future of how social media companies moderate content online. The cases — NetChoice v. Paxton and Moody v. NetChoice — involve Texas and Florida laws that seek to force platforms to carry content from all political viewpoints and would prohibit them from deplatforming politicians, such as former President Donald Trump, for rules violations. Tech trade group NetChoice is challenging both laws. The issue has divided the courts, with the 5th U.S. Circuit of Appeals upholding the Texas law and the 11th U.S. Circuit Court of Appeals striking most of the Florida law for violating the platform’s free speech rights. Both laws are currently blocked.   The Supreme Court’s ruling could have major implications for how social media platforms like Meta’s Facebook and X, formerly known as Twitter, moderate political content and respond to politicians who violate their terms of service, especially going into the 2024 presidential election. — Christine Mui, Rebecca Kern

FINANCIAL SERVICES Legal showdown: The Securities and Exchange Commission is being attacked in the courts from all sides — cryptocurrency giants, traditional Wall Street titans and beyond. The battles are set to heat up in February.   On Feb. 5, lawyers representing the biggest groups in private equity, hedge funds and venture capital, led by former Labor Secretary Eugene Scalia, will square off with the SEC in a New Orleans courtroom. Their goal: Block a package of new rules overhauling how parts of the private-fund market work.   Meanwhile, the SEC, awaits word from a pair of judges in New York and Washington who are weighing pleas from two of the crypto market’s biggest players to throw out the agency’s lawsuits against them. Last month, Coinbase and Binance each argued in court that the SEC was going beyond its authority by levying lawsuits alleging securities law violations. The SEC has rejected the claims. The judges are expected to rule on the motions in the coming weeks.   — Congress and crypto: Congress could move on crypto legislation within the next few months. House Republicans recently began shopping revised text of their landmark bill dividing oversight of the industry between the SEC and the Commodity Futures Trading Commission, which could hit the floor as soon as March. And they're also continuing talks with the White House on stablecoin legislation, which backers hope could move as part of a broader vehicle in the coming months.   Separately, Senate Banking Chair Sherrod Brown (D-Ohio) is crafting his own package to target illicit finance in the industry, which some expect the committee to mark up this spring.   — Oversight: It will also be a big few weeks for administration oversight. Treasury Secretary Janet Yellen is slated to testify before the House Financial Services and Senate Banking committees on Feb. 6 and Feb. 8, respectively. Separately, another Treasury official — potentially Treasury Deputy Secretary Wally Adeyemo — will appear before the House Financial Services Committee to discuss crypto enforcement on Feb. 14.   — DOJ’s v. Realtors: In the waning weeks of Trump’s administration, the Justice Department agreed to end an investigation into the National Association of Realtors. Now, President Joe Biden’s DOJ awaits word about whether it can reopen the probe.   A federal appeals court in Washington is expected to rule in the coming weeks — if not days — on whether DOJ can reopen the investigation into NAR and the system behind how real estate agents are paid. If successful, DOJ will add to an already tall pile of legal risks facing NAR over the compensation system. The group separately faces a torrent of private litigation that, in one case alone, could cost them as much as $5.4 billion. — Declan Harty, Eleanor Mueller

EDUCATION College dining dollars, resources for undocumented students under scrutiny: You may have missed it amid campus conflict over the Israel-Hamas war or the Biden administration’s continued bids to cancel swaths of student debt, but the Education Department is rolling forward with negotiated rulemaking for a policy agenda aimed at institutions of higher education and the state regulators and accreditors that are supposed to oversee them.   At the beginning of February, and then again in early March, the department will host the next discussion phases for its “Program Integrity and Institutional Quality Committee” — and there’s a lot on the panel’s plate. Launched shortly after a separate committee wrapped talks over how to structure Biden’s next mass student debt relief plan, this panel could hash out rules for college dining hall fees and undocumented student access to college prep programs.   The agency proposes allowing undocumented students to participate in federal programs, such as Upward Bound, and several other federally funded college preparatory initiatives aimed at disadvantaged students. The Education Department also wants to stop colleges from keeping students’ unused meal plan funds — on cashlike programs such as “dining dollars” — if they were purchased using a Pell Grant or federal student loan.   — Of particular significance: The Biden administration also proposes a range of changes to how the Education Department oversees college accreditors. Some of the effort is directed at addressing laws passed by Florida under Republican Gov. Ron DeSantis and considered elsewhere that require state universities to frequently change their accreditor.   The department needs to finalize any proposals by Nov. 1 for them to take effect next July. — Juan Perez Jr.

TAX Tax legislation with a real shot at becoming law in February: February will be a significant month for tax policy, with House Ways and Means Chair Jason Smith (R-Mo.) attempting to advance a tax deal he brokered with Finance Chair Ron Wyden (D-Ore.) through the House.   — The deal would expand the Child Tax Credit, restore popular business breaks, provide relief for victims of major federal disasters and alleviate double taxation for companies operating in the U.S. and Taiwan. And House Speaker Mike Johnson has said he wants to put the deal up for a suspension vote that would require a two-thirds majority to pass.   However, it’s unclear whether that plan for a vote will survive messy GOP infighting — with Republicans in vulnerable swing districts pushing for the deal to also include state and local tax relief and members of the House Freedom Caucus pushing to restrict eligibility for the expanded Child Tax Credit so undocumented immigrants can’t get the tax refunds.   — But lawmakers can’t dilly dally on getting this deal to pass. They’ve already blown past Wyden’s deadline of Jan. 29, the start of tax filing season, and the longer lawmakers wait, the more parents will have already filed their returns claiming the family tax breaks — which the agency would have to amend based on the rules of any new version of the credit.   Even if the deal manages to get through the gauntlet of the House, it awaits an uncertain fate in the Senate. Majority Leader Chuck Schumer has endorsed the package, but Minority Leader Mitch McConnell has yet to weigh in. In addition, the top Republican tax writer in the Senate, Mike Crapo of Idaho, said he wants changes to the deal, although he has declined to specify exactly which changes he seeks.   The Center on Budget and Policy Priorities estimates that as many as 400,000 children would be lifted out of poverty as a result of the expanded CTC, if enacted.   — Businesses have also been eagerly awaiting a restoration of immediate deductions for research and development activities. Less generous rules have crippled many small businesses that now have to spread out R&D expenses over five years. — Benjamin Guggenheim

HEALTH CARE As CMS starts Medicare drug price negotiations, Pharma is still pushing back: The Biden administration is implementing the Inflation Reduction Act’s Medicare drug price negotiation program, which allows CMS to enter talks with drugmakers for a set of drugs that will grow over the coming years.   The initial 10 Medicare Part D drugs were chosen for price talks between the government and drugmakers in August by CMS. They include Bristol Myers Squibb’s blood clot drug Eliquis, Merck’s diabetes drug Januvia and Novartis’ heart failure drug Entresto.   — What now? Washington readies for the next step in the implementation of the first Medicare drug price negotiations. CMS is mandated to send its initial offers to the manufacturers of the opening slate of drugs selected for the program by Feb. 1. The agency must send a “concise justification” to each pharmaceutical company of the initial maximum fair price for a selected drug. But, it is uncertain whether drugmakers might choose to make public the initial offers from CMS.   Each pharmaceutical company will have 30 days to accept the proposed price or make a counteroffer. If the companies counter, CMS will hold up to three negotiation sessions during the spring and summer if the agency does not accept the counter.   — Other deadlines: On Aug. 1, the negotiation period ends. And by Sept. 1, the government will publish the final drug prices in the first negotiations. Those prices would take effect in 2026.   — The companies’ view: Several impacted drug companies and industry groups, such as the U.S. Chamber of Commerce, are fighting the law in court. An oral argument in a case brought by AstraZeneca has already taken place, and the other cases are making their way through the courts.   — The White House view: The program is a major step for a policy that Biden has touted as a key domestic achievement since entering the White House. Democrats have pushed unsuccessfully for years to add drug price negotiation power to Medicare. — Pro Health Care Staff

TRANSPORTATION FAA reauthorization continues in limbo: Despite assurances from senators toward the end of 2023 that the Senate Commerce Committee was rapidly approaching marking up its bill to reauthorize the Federal Aviation Administration, Congress is back in full swing, and there doesn't appear to be much obvious movement toward a deal. That means the bill, already overdue, will remain in limbo for some time longer as the next deadline for reauthorizing programs nears in March.   Of course, even if the committee can mark up a bill before the current stopgap expires, it still must be passed on the Senate floor and then conferenced with a House version before it can be enacted into law — so it's likely more extensions are ahead. — Kathryn A. Wolfe

EMPLOYMENT AND IMMIGRATION Follow the rules: The administration has been extremely active on the rulemaking front, with the aim of getting many major regulations out the door in the early part of this year to better shield them from the risk of being blocked via the Congressional Review Act or the federal courts.   Among those in the works are the Labor Department’s crackdown on toxic silica dust exposure and an expansion of overtime guarantees to potentially millions of workers.   Both proposals were issued over the summer, and the agency is targeting a final version by the spring, though those timelines can shift as policymakers fine-tune language. — Nick Niedzwiadek

DEFENSE Ukraine aid in the balance: The coming days and weeks will be pivotal in efforts to secure new funding to assist Ukraine as well as Israel and Taiwan. The $111 billion supplemental package, along with a border security deal, is inching toward consideration in the Senate.   The Biden administration has warned that money to assist Kyiv has nearly run out and could soon impact Ukraine on the battlefield.   But Republicans, who condition new Ukraine aid on border restrictions, are wavering amid opposition from Trump. Even if the deal can pass the Senate, Johnson has signaled he's not inclined to back the bipartisan border package.   — Meanwhile, Defense Secretary Lloyd Austin could soon face public questioning over his secretive hospitalization in early January. House Armed Services Chair Mike Rogers (R-Ala.) wants Austin to testify on the episode, which saw the Pentagon chief hospitalized for days for complications from earlier prostate cancer surgery before the White House was informed. It's unclear whether the Pentagon will be able to head off that public hearing. — Connor O’Brien