Washington Weekly

U.S. Office of Public Policy, 8 March 2019

This Week:

The House passed a comprehensive government and campaign finance ethics bill (see below). It also passed a controversial anti-hate resolution. The Senate confirmed a handful of Trump administration nominations.

Next Week:

The House will vote on a resolution in support of making public the impending report filed by Special Counsel Robert Mueller on Russian involvement in the 2016 presidential election. The Senate will vote on a measure to address President Trump's emergency declaration along the southwest border (see below).

Financial Services Issues

Mandatory Arbitration.

House and Senate Democrats recently introduced legislative proposals that would ban mandatory arbitration clauses across a variety of contracts. One bill offered by Senator Sherrod Brown (D-OH), the top Democrat on the Senate Banking Committee and, until yesterday, a presidential candidate, would block these clauses in contracts covering a range of consumer financial products (to include credit cards, bank accounts, and student loans). This ban would make it easier for class action lawsuits to proceed, which business groups argue would raise costs on consumers. Brown’s proposal is an attempt to revive an Obama-era rule by the Consumer Financial Protection Bureau that was overturned by Congress in 2017. Mandatory arbitration clauses likely will come under criticism next week at a House Financial Services Committee hearing on consumer abuses at Wells Fargo. The House likely will pass legislation to curb mandatory arbitration contracts, but these efforts will falter in the Senate.

Other Issues in Play

House Ethics Bill.

The House today passed on a party-line vote a sweeping package of election law, campaign finance and public ethics reforms. The close-to-600-page bill was the first one introduced in the new Congress, and House Democrats have been keen to take it up quickly as a means of highlighting their proposals to “clean up” Washington. The bill includes a variety of measures to expand voting protections (including through automatic voter registration), increase transparency and limits in campaign contributions, and bolster ethics requirements for current and former public officials. One controversial provision would offer a taxpayer-financed match for campaign contributions under $200 made by individuals. With Republicans criticizing the bill for undue federal interference in elections, it will go nowhere in the Republican-controlled Senate. The legislation, instead, is an aspirational and political messaging document for Democrats. Many provisions of the bill resonated with voters during the 2018 midterm elections, and Democrats plan on continuing to focus on them going into 2020.

Emergency Declaration on Border.

Following the House vote last week to overturn the President's declaration of an emergency on the southwest border, the Senate will vote on the measure next week. A clear majority in the Senate now exists to support the measure, which would trigger a veto by President Trump. Senate Republican leaders don't want to embarrass the President and are searching for an alternative that would allow Senate Republicans to affirm support for the President's border security plans but not necessarily via an emergency order. Regardless, the exercise will show a split among Republicans on the use of an emergency declaration and the precedent it sets for future presidents. All of this action in Congress will fall by the wayside once the President vetoes the final measure passed by both the House and Senate, if there is one, and his emergency plans and funding will continue to move forward this year.

Non-Stop Trade Issues.

While the US and China continue to work toward a possible trade deal over the next few weeks, it's important to note that the Trump administration will quickly pivot to other important trade issues once negotiations with China are completed. Its next priority is to build greater congressional support for the US-Mexico-Canada Trade Agreement, which should come up for a vote in the second half of this year. To help with that effort, the US likely will soon remove higher steel and aluminum tariffs on Mexico and Canada. Additionally, the US will formally initiate separate trade agreements with the EU and Japan and wrestle with other potential tariff increases in the automobile, auto parts, titanium sponge and uranium industries. While not as high profile as the trade dispute with China, many of these post-China issues will trigger market reactions depending on their outcomes and will be at the forefront of Washington developments all of this year.

Prescription Drug Prices.

Various House and Senate committees held hearings this week on the high costs of prescription drugs, underscoring a determination of lawmakers from both parties to act on this issue this year. Congress and the Trump administration have had some success in shaming the industry into voluntarily lowering prices over the last two years. Now, the much harder part of legislating to bring prices under control will begin. There is bipartisan support (and even some industry support) for bills to promote generic drugs and to prevent the major drug companies from interfering in the process of generic drug approvals, but these are viewed as fairly modest measures. More far-reaching measures to address the perceived monopoly status of many of the drug companies or to place limits on drug prices will generate some attention. However, these proposals lack the broad support to move forward at this time. Lawmakers are especially interested in how prescription drugs are priced and, in particular, how insurance companies and pharmacy benefit managers interact in that process. These issues are complicated, and most lawmakers need more time to understand them before more impactful measures to address drug pricing are seriously considered.

Tax Extenders.

Dozens of targeted federal tax provisions expired at the end of 2017 and 2018, and very little progress has been made to renew them before 2018 taxes are due next month. Senate Finance Committee Chairman Chuck Grassley (R-IA) and top committee Democrat Ron Wyden (D-OR) introduced a bill to renew 29 expired tax provisions along with additional tax measures on disaster relief and medical expense deductions. This package includes extensions of tax credits for biodiesel, railroad track maintenance and energy efficient homes, among others. House tax writers are moving more slowly and will hold a hearing next week on the topic. While there has been an urgency to act on this issue in previous years, this has been a lower priority in the current Congress. Unless there is an uptick in interest in the next week or two, these tax provisions will likely be in limbo, something that at least a few taxpayers will notice next month when they complete their returns.

The Final Word

The Importance of Puerto Rico.

In January, when former San Antonio mayor Julián Castro announced his candidacy for the 2020 Democratic presidential primary, he indicated that his first visit as a candidate would be to Puerto Rico, not Iowa, which has been a long-standing tradition among presidential candidates. Shortly thereafter, Senator Elizabeth Warren (D-MA), another announced candidate, visited the island. Senator Bernie Sanders (I-VT) named San Juan's mayor as his campaign co-chair, and former Vice President Joe Biden recently hired the former head of the Latino Victory Fund (and a Puerto Rico advocate) for his potential campaign. While it is not unusual for presidential candidates to visit Puerto Rico in an attempt to win over primary voters, the island has become a target for some candidates. Why? First, over 1 million Puerto Ricans live in Florida, a swing state coveted by any national politician. Making a good impression in Puerto Rico translates into votes in Florida. Second, the public perception on the island is that President Trump failed to respond adequately to damages from Hurricane Maria in 2017, an issue that Democrats no doubt will try to highlight through their visits. Third, national Hispanic groups like the focus on Puerto Rico and on other issues of interest, which translates into votes for a critical bloc of registered Democratic voters. The focus on the island will only intensify this year as the Democratic primary election heats up.