Window on Washington - Vol. 2, Issue 6

by Clark Hill PLC

Outlook for This Week in the Nation's Capital

FY18 Appropriations Work Already Underway. Since the passage of the bipartisan budget deal this past Friday, House and Senate Appropriations Committees have already begun working on drafting the FY18 Omnibus bill that will finally allow Congress to stop funding the government through continuing resolutions. The Committees are expected to set the new subcommittee allocations for each spending bill as early as this week, which is the first step in drafting the Omnibus bill. This action is already being complicated though by some side deals made within the budget agreement, like the funding to fight the opioid epidemic and infrastructure spending. The Appropriations Committees must decide how to split the funding in these side deals between their subcommittees before they can set their new allocations for FY2018.

FY19 Budget Release Today. The Trump Administration plans to release its FY19 budget request later today. However, the full request cannot be reworked in time to allow for the increased spending level for FY2019 agreed to in the budget deal last week. The Administration is working on releasing an additional addendum which would show how the Administration would account for the extra spending. This new work has caused some agencies to cancel their budget rollout briefings for today and it’s unclear how long it will take for some agencies to release their full Congressional Justification documents for FY2019.

Senate Begins Immigration Debate. Later today, the Senate is scheduled to begin its work on immigration policy as promised by Majority Leader McConnell as part of an agreement to end the government shutdown last month. McConnell has agreed to let any senator propose an amendment related to immigration and the package will contain those policies that receive 60 votes. The future of this plan is uncertain as Speaker Ryan in the House has not agreed to bring up the Senate bill and has only committed to holding a floor vote before March 5 on a piece of legislation that President Trump would be willing to sign. The Trump Administration announced last year that it would end the DACA program on March 5 unless Congress acted.

Last Week in the Nation's Capital



Increased Budget Caps Bring Infusion of Funding to Agencies:  The massive infusion of cash approved by Congress early Friday morning is slated to lift the budgets of federal agencies and the Pentagon far beyond what they were at the start of the Trump presidency, ending the era of restraint that had gripped the federal government for most of this decade. The deal, signed into law by President Trump, will pump more than $500 billion over two years into domestic agencies and the Pentagon, the biggest increase in spending in almost a decade. (The Washington Post)

Brief Government Shutdown Ended Friday Morning After Budget Deal Signed: Congress passed a sweeping budget deal early Friday morning that lifted spending caps and technically reopened federal agencies. Trump signed the bill into law shortly after its passage allowing for the brief government shutdown to have virtually no impact. The deal will keep continue government spending through March 23 and lifted the budget caps that would be imposed on FY18 spending from sequestration.  Nondefense discretionary spending caps will be raised by $131 billion and defense caps would rise $165 billion in fiscal years 2018 and 2019. The deal also included $90 billion in disaster aid. (CNN)

Tax Reform

The AICPA and the Ongoing Tax Reform Process:  Experts from the American Institute of CPAs discuss how the new tax law will have wide-ranging effects on individuals and businesses — and on the CPAs who advise them — for years to come.  The law will also require significant guidance from the IRS on a number of provisions, so the implementation may also stretch out over several years. (Journal of Accountancy)

Debt Ceiling

Congress Raises Debt Ceiling: As part of the budget deal passed last week, Congress raised the debt ceiling until March 2019. Rather than raise the debt ceiling by a specific dollar amount as Congress has historically done, lawmakers chose to suspend the limit through March 1, 2019. (CNN Money)


Budget Deal Includes $2 Billion for NIH: The bipartisan budget agreement increases funding for the National Institutes of Health by $2 billion and raises spending to address the opioid and mental health crisis by $6 billion over the next two years. The $6 billion for the opioid crisis over two years falls roughly in line with recent proposals from Democrats and Republicans who had advocated for between $2 billion and $4.5 billion in additional funding for addiction treatment and prevention each year for the next decade. (STAT News)


Senator Gardner Continues Blockade on DOJ Appointments: Senator Gardner of Colorado is continuing with his promise to block all appointments to the Department of Justice until Attorney General Jeff Sessions softens his stance on marijuana. He has prevented as many as 11 nominees from getting a Senate floor vote and so far there is no resolution in sight. (Denver Post)


Lawmakers Call on Trump to Preserve NAFTA: Several members of the Senate Finance Committee, who met with Trump at the White House, expressed the importance of the 24-year-old NAFTA pact with Mexico and Canada to the U.S. economy along with the their concerns about the U.S.- China trading relationship. (The Hill)


Senate Budget Deal Includes $20 billion for Infrastructure Projects:  A bipartisan budget deal announced by Senate leaders Wednesday includes $20 billion for U.S. infrastructure programs, an investment plan that comes ahead of the Trump Administration's highly anticipated rebuilding proposal on Monday. The funds would go toward “existing” projects for water and energy infrastructure as well as expanding broadband to rural regions and improving surface transportation, Senate Minority Leader Charles Schumer (D-N.Y.) said in a floor speech detailing the proposal. (The Hill)


Energy Tax Credits Included in Budget Deal: Tax credits for biofuel producers and a nuclear reactor project were included in a budget deal that Congress passed last week. Among the tax credits that were retroactively extended through 2017 after expiring at the end of 2016 is the $1-a-gallon tax credit for mixing biodiesel and a$1.01-a-gallon tax credit for the production of cellulosic ethanol. (Bloomberg)

Executive Branch


Budget Request Will Include Proposals to Lower Drug Prices: The proposals include making sure seniors in Medicare benefit from discounts that middlemen, known as pharmacy-benefit managers, negotiate with drugmakers, establishing a spending cap on out-of-pocket prescription costs, and potentially making generic drugs free for low-income seniors. Many of these proposals would have to be legislated by Congress, which has historically ignored presidents’ budgets and lays out its own framework instead. The budget request is expected to be released later today. (Bloomberg)


DeVos: Apprenticeships, Vocational Education are Top Trump Priority: Expanding apprenticeship and vocational education are a priority of the Trump Administration, Secretary of Education Betsy DeVos said last Tuesday in a meeting of the Department of Labor's specially chartered Task Force on Apprenticeship Expansion. The task force was chartered in accordance with a June executive order, and is now jointly chaired by DeVos, Secretary of Labor Alexander Acosta, and Secretary of Commerce Wilbur Ross. (The Washington Free Beacon)

Unpaid Internships: Federal Law Evolving, Garden State Unchanged: In January, the Department of Labor announced that it would use a new method to determine whether interns or students working for non-profit organizations should be paid under the Fair Labor Standards Act. The DOL’s new analysis will focus on six factors and is meant to be flexible without any one factor being determinative of the relationship. The test is referred to as the “primary beneficiary test” and looks at the “economic realty” of who really benefits from the internship – intern or employer.  If the employer is the primary beneficiary, the relationship is much more likely to be deemed as a traditional employee/employer arrangement requiring compliance with wage and hour laws including minimum wage and overtime. (Clark Hill Insight)

Department of Energy

Department of Energy Announces $35 Million for Emerging Research Projects to Address Manufacturing Challenges: This funding opportunity allows selected projects to perform early-stage research and development (R&D) of new, advanced manufacturing technologies as well as encourage R&D contributions from new partners. Successful projects will reduce technical uncertainty and develop new knowledge associated with potential breakthrough materials, processes, and tools for U.S. manufacturers that could improve their competitiveness and enhance their energy efficiency. (Department of Energy)


DoD Budget Request Will Include Future Years Defense Program Numbers: The Pentagon’s budget request for fiscal year 2019 will include future years defense program numbers, known as the FYDP, after a one-year blip in which those numbers were mostly not included. In the FY18 budget request, some programs came with no FYDP figures at all, and in other cases, those numbers were placeholder figures that the acting comptroller said analysts and reporters should largely ignore. (Defense News)


New Horizons Captures Record-Breaking Images in the Kuiper Belt: During its extended mission in the Kuiper Belt, which began in 2017, New Horizons is aiming to observe at least two-dozen Kuiper Belt Objects, dwarf planets and "Centaurs," former KBOs in unstable orbits that cross the orbits of the giant planets. Mission scientists study the images to determine the objects' shapes and surface properties, and to check for moons and rings. The spacecraft also is making nearly continuous measurements of the plasma, dust and neutral-gas environment along its path. (SpaceRef)

Military Certification the Next Big Test for Falcon Heavy: The inaugural launch last week of the frequently delayed rocket now sets the stage for SpaceX’s Falcon Heavy to begin the qualification process to compete for lucrative U.S. government contracts.  The U.S. Air Force has already booked the rocket for a June launch of a test payload, but the Falcon Heavy may have to nail many more missions before it passes the threshold to be certified by the U.S. Air Force - certification could take as many as 14 or as few as two flights, according to the Air Force Space and Missile Systems Command.  SpaceX also signaled that they do not intend to try to qualify the rocket for astronauts, reversing previous plans to do so. (Space News)


What an Overhaul of Fannie Mae and Freddie Mac Would Mean for Commercial Real Estate:  CMBS loans for multifamily properties have increasingly been going to Fannie Mae and Freddie Mac in the decade since the global financial crisis.  At the same time, the rumblings of change are making themselves heard in the distance. If the latest efforts to overhaul the U.S. housing finance system don’t fall by the wayside the way previous attempts did, such changes – especially coming as Fannie and Freddie are on the rise – could have broad implications for the securities market as well as lenders, taxpayers, multifamily lending and the housing finance system. (Forbes)

Big Data vs. the Credit Gap:  There’s a catch-22 at the core of the U.S. financial system: To get credit, you need to already have established a credit history. Millions of Americans never find a way around the contradiction, and as a result, are locked out of things like credit cards or student loans that the rest of the population can take for granted. Opening up credit could potentially benefit a huge swath of people: A 2015 study by the bureau found that 26 million adult Americans were “credit invisible,” meaning that for practical purposes, they don’t exist to the credit firms that collect financial history of borrowers. (Politico)


A Year After Ascending, DeVos Hails Shrinking of the Education Department: Education Secretary Betsy DeVos proclaimed this week that her proudest accomplishments in her first year in office were shrinking the role of the agency, rolling back Obama-era initiatives and erasing outdated regulations. The secretary reflected on her tenure a year after she was installed in the post, following a trial-by-fire confirmation. Last year, the Senate confirmed her by the narrowest margin possible — with Vice President Pence casting a tie-breaking vote to make her education secretary. It was the first time a vice president had to vote to confirm a Cabinet member. (The Washington Post)

DeVos Strikes a Softer Tone: A year into her tenure as President Donald Trump’s controversial Education secretary, Betsy DeVos is more likely to tout “personalized learning” than “private school vouchers.” She generally steers clear of pushing “school choice” — a phrase freighted with racial, demographic and religious implications — outright. Instead, DeVos’ vocabulary includes gentler terminology like “innovation” and “blended learning,” and she speaks of coming together and “finding solutions.” (Politico)


Senators Demand Answers from CFPB on Equifax Probe: More than 30 senators are asking the Consumer Financial Protection Bureau for details about their investigation into last year’s massive Equifax data breach following reports the agency has been dragging its feet on the probe. The group, led by Sen. Brian Schatz (D-Hawaii), sent a letter to the CFPB, dated Feb. 7, which cites a Reuters report that Acting Director Mick Mulvaney has not approved a number of preliminary steps in the investigation. (The Hill)

White House

Trump's Choice for Ethics Chief Wins Praise As 'Somebody Who Plays it by the Book': President Trump has picked a new chief for the Office of Government Ethics, seven months after the last confirmed head of the agency quit in frustration over his conflicts with the White House. Emory A. Rounds III is an associate counsel at OGE, a career civil servant who previously served in the ethics office of the Commerce Department and in the Navy's Judge Advocate General's Corps, or the JAG Corps. The White House announced last Wednesday that Trump intends to nominate Rounds as OGE director for a five-year term that requires Senate confirmation. (NPR)


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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