Policy Week in Review - Iran Strikes Escalate, DHS Funding, and the FY 2027 Budget and Appropriations Process Begins
- Andy Koenig
- Mar 20
- 9 min read
Updated: May 11
Key Takeaways
Operation Epic Fury continues, and Iran has escalated attacks on energy facilities as it uses global economic instability as its most potent weapon.
This week, the Department of War prepared a $200 billion funding request to pay for the cost of operations against Iran.
As lines at airports grow because of TSA staffing shortages, Congress faces new pressure to reopen DHS.
The FY 2027 federal spending process in underway, and a $1.5 trillion defense budget is the biggest question mark.
The DOJ’s probe into Federal Reserve Chair Jerome Powell is delaying his replacement's nomination hearings.
Housing affordability legislation that passed in the Senate faces slow negotiations with the House.
The Senate considered voter ID requirements (SAVE America Act) this week, but this major priority for President Trump has little chance in the Senate.
Warrantless surveillance under FISA is expiring and Congress has a tough vote next week.
Cuba indicates it could be taking negotiations with the U.S. more seriously as the crisis deepens.
Negotiations on the United States-Mexico-Canada (USMCA) agreement started this week.
Iran Escalates with Attacks on Energy Facilities
This week marked a major escalation in retaliation by Iran as the regime launched attacks at energy facilities in nearby Gulf states following the killing of Ali Larijani - Iran’s security chief - and Israeli strikes on the South Pars natural gas field shared by Iran and Qatar:
Iranian missiles reportedly caused “extensive damage” to Qatar’s Ras Laffan Industrial City, home to the largest liquefied natural gas export facility in the world.
Saudi Arabia thwarted an attempted drone attack on gas facilities in its eastern region.
Iran also launched attacks on the Habshan gas facility and Bab oil field in the United Arab Emirates.
In response, President Trump sternly warned Iran that the United States would “massively blow up the entirety of the South Pars Gas Field” if Iran continued to target Qatar’s energy facilities.
Tehran’s targeting of Gulf energy infrastructure is the regime’s latest ploy to sap international appetite for confronting and halting its nuclear advancement by roiling energy markets to push up the price of oil and gas following its blockade of the Strait of Hormuz. After feeling the effects of the blockade, Britain, France, Germany, Italy, the Netherlands, and Japan have finally heeded the President’s call to action to secure the straits. In a joint statement, the nations expressed their “readiness to contribute to appropriate efforts to ensure safe passage through the Strait.”
Meanwhile, reports indicate that the President is carefully weighing possible next steps on Iran, including the option of deploying U.S. troops. If President Trump were to commit troops, it could be in a limited capacity, such as deploying troops to Iran’s shoreline to support air and naval forces in securing passage for oil tankers through the Strait of Hormuz.
White House Readies $200 Billion War Funding Request
This week, it was reported that the Department of War is preparing to send Congress an emergency supplemental funding request to pay for military action related to Operation Epic Fury. The White House will reportedly ask Congress for $200 billion in military funding. Democrats in Congress have offered opposition to the spending, which will complicate passage, especially in the House where Republicans can afford to lose only one vote.
In order to pass the bill in Congress, Republicans could try to tie Democratic priorities like highway or wildfire relief dollars to the bill. Even under that strategy, partisanship may delay funding for military efforts for weeks or months. Spending on resources for troops and weapons may quickly turn into a Trojan horse for orphaned legislation or become a victim of election year campaign politics.
Republicans could also try to pass it using partisan reconciliation which only needs 50 votes in the Senate. That strategy is fraught because of the extremely tight margins in Congress. That process also requires passage of a concurrent budget resolution, meaning a reconciliation bill essentially needs majority votes to clear Congress. In any event, the path forward for war funding is very unclear.
Slow Movement on a Homeland Security Funding Agreement
For the first time in weeks, the Hill saw positive movement toward a funding agreement for the Department of Homeland Security (DHS). A bipartisan group of Senators met on Thursday with White House Border Czar Tom Homan. The meeting comes as the Senate faces new pressure points:
The House passed a bill to fund DHS on March 5, 2026, by a vote of 221-209.
The legislation did not address demands made by Congressional Democrats.
As was the case with the broader government shutdown last fall, a bipartisan deal must be reached in the Senate to obtain 60 votes and overcome the Democratic filibuster.
Any deal with White House support and 60 Senate votes would pass in the House.
Senate Majority Leader John Thune (R-SD) has threatened to cancel the Senate’s upcoming two-week recess if DHS remains unfunded.
Senator Markwayne Mullin’s (R-OK) nomination to serve as Secretary of DHS was approved by the Senate Committee on Homeland Security & Governmental Affairs on Thursday, 8-7. He is expected to be easily confirmed by the full Senate as soon as next week.
2027 Budget and Appropriations Process Begins
While FY 2026 funding for DHS remains unresolved in Congress, discussions on appropriations spending for FY 2027 have begun. The President’s budget request is expected in the next few weeks. That submission starts the legislative process:
The President’s budget is submitted to Congress.
House and Senate appropriations committees decide their own funding allocations for defense and non-defense discretionary spending in 2027.
Appropriations subcommittees write individual bills that adhere to those numbers.
Those 12 appropriations bills are passed in each chamber.
House and Senate bills are merged, reconciled, approved, and sent to the President.
While the process is supposed to be done by October 1, 2026, Congress has not passed all 12 appropriations bills before the end of the fiscal year since 1997. This year will be no different.
The biggest question for the White House Office of Management and Budget (OMB) and Congressional appropriations committees is how to increase the spending level for defense and sustain Operation Epic Fury. On January 7, 2026, President Trump proposed a $1.5 trillion budget for defense in FY 2027. Compared to FY 2026 security spending, which totaled $902 billion, the request would represent an increase of $597 billion, or 66%. According to the Congressional Budget Office, total discretionary budget authority in FY 2026 will be $1.673 trillion. The President’s goal of $1.5 trillion would consume 90% of FY 2026 discretionary spending.
That may or may not include the expected $200 billion supplemental funding request from the White House to support military strikes in Iran.
Federal Reserve Keeps Interest Rates Level
The Federal Reserve (Fed) met on Wednesday and voted to keep interest rates unchanged. Only Stephen Miran voted against the action, preferring to further lower interest rates. The announcement from the Fed referenced low job gains and an unchanged unemployment rate, along with elevated inflation and developments in the Middle East.
Meanwhile, President Trump’s nominee to serve as Fed Chair, Kevin Warsh, continued meetings with Senators on the Hill, although the timing of his nomination remains uncertain given Senator Thom Tillis’ (R-NC) hold on the nomination until a Department of Justice probe into current Fed Chair Jerome Powell is resolved. Powell also said this week that he “has no intention” of leaving the Fed until after the investigation is resolved. Powell’s term as Chair is scheduled to end in May, although he could remain on the Fed until January 31, 2028. A federal judge threw out subpoenas as part of the probe last week, but the DOJ will appeal the ruling.
Policy Makers Look for Ways to Lower Gas Prices
While President Trump reiterated his commitment to Operation Epic Fury, officials are looking at options to reduce short-term pain of rising oil prices. Policy options that have or could be taken to help reduce gas prices domestically, include:
Securing the Strait of Hormuz
Waiving the Jones Act or exempting for oil and gas
Further tapping the Strategic Petroleum Reserve
Allowing the sale of year-round E15
Granting targeted tariff exemptions
Easing Russian sanctions
Purchasing oil from previously sanctioned foreign countries
Reinstating crude export ban
Legislative action to reduce energy production approval times
Suspending the 18.4 cent federal excise tax
Bipartisan Housing Program Reform Bill Likely Going to Conference
The House appears poised to go to conference on housing legislation after the Senate overwhelmingly passed the bipartisan ROAD to Housing Act. Members of the House Financial Services Committee want a chance for House-passed priorities to be included in the bill, and both Republican and Democratic leadership in the House has supported efforts to go to conference rather than taking up the Senate-passed bill. As long as President Trump is not pressuring the House to act on the legislation, the House has more space to give voice to their concerns and push back on the Senate bill. Options for the House include either passing an amended bill and sending it back to the Senate or putting a privileged motion to conference on the House floor to start negotiations.
White House Continues to Focus on the SAVE America Act
While there are a number of potentially bipartisan bills stuck in Congress, President Trump has made the SAVE America Act his top domestic legislative affairs priority for the remainder of the year. With the full weight of the White House behind the bill, pressure is on Senate Republicans to find a way to pass the legislation. While there is still no credible path through the Senate short of reforming the filibuster, the bill is being seen by many conservatives as a vehicle to attach other policies, which could ultimately include FISA reauthorization.
Contentious FISA Reauthorization Comes into Focus
Section 702 of the Foreign Intelligence Surveillance Act (FISA) - which authorizes the collection of intelligence on foreign nationals located outside of the United States without a warrant - is set to lapse on April 20, 2026. With the House scheduled to be out of session March 30 through April 13, leadership will have a challenging time passing an extension in time for the Senate to take it up before authorization expires.
According to Speaker Mike Johnson (R-LA), the plan from House GOP leadership is to move a clean extension of FISA for at least 18 months. Section 702, however, has long been controversial amongst hardline conservatives who see the provision as an overreach of federal surveillance powers. Conservatives such as Representative Lauren Boebert (R-CO) have expressed opposition to a clean extension without reforms to mandate judicial warrants before seeking to review messages involving Americans. Others, such as Representative Anna Paulina Luna (R-FL) favor attaching the must-pass reauthorization to the SAVE America Act to force the Senate to pass the sweeping election overhaul.
Cuba Experiences Third Major Blackout As Crisis Deepens
Cuba experienced an island-wide blackout on Monday, the third major blackout in four months and the first since the United States halted Venezuelan oil from going to the island. Protests accompanied the power outage as residents expressed their discontentment with living and economic conditions.
The blackout came as the U.S. ramps up pressure on Cuba to reform. Last Friday, Cuban President Miguel Díaz-Canel confirmed for the first time that his government was engaged in talks with the United States aimed at identifying “problems that require solutions based on their severity and impact, and…to find solutions to these identified problems.” This acknowledgement from an ordinarily defiant Díaz-Canel was seen as a concession that Cuban leaders were taking negotiations with the U.S. seriously.
Reforms that have been announced by the Cuban government so far - such as allowing foreign investment into the country - have not gone far enough for the United States. According to Secretary of State Marco Rubio, “Cuba has an economy that doesn’t work in a political and governmental system that can’t fix it. So they have to change dramatically. What they announced yesterday is not dramatic enough. It’s not going to fix it. So they’ve got some big decisions to make over there.” Secretary Rubio further explained that without subsidies from historic allies like Venezuela, Cuba is “in a lot of trouble, and the people in charge, they don’t know how to fix it, so they have to get new people in charge.”
Negotiations Begin with Mexico on USMCA
This week, negotiations between the United States and Mexico on the future of the United States-Mexico-Canada Agreement (USMCA) officially began ahead of the joint review scheduled to take place on July 1, where representatives from the three countries will meet to determine the future of the agreement. Speaking to the House Ways and Means and Senate Finance Committees in December, United States Trade Representative Jamieson Greer outlined a list of issues the United States hoped to address with Mexico under USMCA, including:
Policies that erode U.S. supply chains and promote third-country content, such as with China.
Energy policies and practices that harm the U.S., including recent constitutional reforms to renationalize its energy sector.
The adverse impact of Mexican seasonal produce imports on U.S. growers.
While negotiations continue with Mexico, Greer noted that talks with Canada have fallen behind. At this point, a wholesale renewal of USMCA appears unlikely, and the United States remaining party to the agreement will likely be contingent on targeted changes to address imbalances identified by the U.S. Trade Representative.
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