Washington On One - March 2, 2026

THE LEDE:  DHS, still shutdown…Longest SOTU in history, rather light on policy proposals…U.S. and Israel launch attack on Iran…Trump says Iran’s supreme leader, Ayatollah Ali Khamenei, has died, and adds that military operation will continue…U.S. expects more casualties, Joint Chiefs Chairman Dan Caine says, as Iran war widens…After it rejected terms its work with the DoW, Trump orders U.S. government to drop use of Anthropic’s technology, in dispute over access to its AI…Bill Clinton tells GOP-led panel he had no knowledge of Jeffrey Epstein’s crimes…DOJ reviewing whether Epstein files with Trump allegations were wrongly withheld…Lawrence Summers resigns from teaching at Harvard over ties to Jeffrey Epstein…White House ballroom project can continue for now, judge rules…Trump administration to withhold $259 million in Medicaid funds from Minnesota, citing fraud…Trump policy of deporting migrants to countries where they are not citizens is unlawful, judge rules…

STATE OF THE UNION:  President Trump’s State of the Union address formally opened the 2026 midterm cycle but emphasized tactical restraint over legislative expansion. The speech avoided direct confrontation with the Supreme Court following the tariff ruling and did not pressure congressional Republicans into another sweeping reconciliation effort. Instead, it functioned as a campaign blueprint centered on tax cuts enacted in 2025, aggressive immigration enforcement, deregulation, cultural issues, and a renewed push to codify international reference drug pricing.  Trump promoted TrumpRx and children’s investment accounts as affordability measures but offered limited new legislative directives. He declined to seek congressional codification of his revised tariff regime and maintained ambiguity on Iran policy despite escalating tensions. House leadership has acknowledged razor-thin margins, limiting appetite for ambitious pre-midterm policymaking.  Democrats framed the address as disconnected from cost-of-living concerns and consolidated around an affordability-centered counterstrategy. The speech stabilized Republican messaging but did not materially alter legislative trajectory. The midterm debate is now anchored around competing economic narratives rather than major new policy proposals.

IRAN:  In a dramatic escalation of regional conflict, the United States and Israel launched coordinated military strikes against Iran on February 28, 2026, marking one of the most significant confrontations between Tehran and Western allies in decades. The joint campaign, described by U.S. officials as “major combat operations,” was executed involving extensive air and sea launches targeting Iranian leadership, military infrastructure, missile systems, navy assets, and command-and-control facilities across multiple cities, including Tehran. The coordinated effort has been characterized as a preemptive operation intended to degrade Iran’s capacity to threaten the United States, Israel, and regional partners.  President Donald Trump publicly framed the attacks as necessary to disrupt what his administration labeled imminent threats related to ballistic missiles, nuclear ambitions, and proxy activity. He asserted that the United States would continue operations “until objectives are achieved,” emphasizing that the offensive was aimed at dismantling specific capabilities rather than a protracted ground war.  The early phase of the strikes reportedly resulted in the death of Iranian Supreme Leader Ayatollah Ali Khamenei, confirmed by Iranian state media, which announced his demise following the bombardment of his compound. Tehran responded with a widespread barrage of missiles, drones, and strikes on U.S. forces and Israeli targets in the region, including attacks on bases and allied countries in the Persian Gulf.  The operation has quickly expanded beyond Iran’s borders as Iranian-aligned groups launched retaliatory strikes against Israel and U.S. positions. Hezbollah and other proxies in Lebanon began targeting northern Israel, prompting Israeli counterstrikes. The conflict has disrupted civilian air travel, strained oil markets by threatening key routes such as the Strait of Hormuz, and drawn international condemnation and calls for de-escalation.  As the situation continues to unfold, U.S. military leaders have cautioned that additional American casualties are likely and reiterated that the campaign’s goals include neutralizing ballistic missile threats, degrading naval capabilities, and preventing nuclear development, even as a clear exit strategy has not been publicly articulated.

NATIONAL SECURITY:  U.S.–Israeli strikes on Iranian targets overtook bipartisan efforts to reassert congressional war powers authority. While Congress rarely compels compliance under the War Powers Resolution, renewed resolutions reflect institutional discomfort with unilateral escalation. The administration maintains that operational flexibility is essential amid regional instability.  Simultaneously, the April 20 expiration of Section 702 surveillance authority creates a high-stakes legislative deadline. The White House seeks a clean extension, arguing national security necessity. Bipartisan privacy coalitions demand reforms to limit incidental collection involving Americans. Passage risk remains elevated in the House due to procedural hurdles and skepticism toward executive restraint.  These parallel developments reinforce a structural theme: executive authority continues to expand into contested domains while Congress attempts episodic pushback without durable enforcement mechanisms. The next 60–90 days could feature symbolic but politically consequential votes on war powers and surveillance renewal.

TRADE, TARIFFS & INTERNATIONAL FALLOUT:  Following the Supreme Court’s invalidation of emergency-based tariffs, the administration pivoted to alternative authorities under Sections 122, 301, and 232 to preserve tariff leverage. While narrower in scope, these tools maintain strategic flexibility. However, fiscal and legal exposure has intensified.  Senate Democrats introduced legislation mandating refunds of up to $175 billion in tariff collections. Corporate litigation seeking repayment has accelerated. Even absent enactment, refund debates complicate budget projections and trade negotiations.  Internationally, the European Parliament froze ratification of the Turnberry accord, arguing that newly imposed tariffs breach prior commitments. This introduces diplomatic credibility risk and complicates broader transatlantic alignment.  Tariffs now sit at the intersection of legal vulnerability, fiscal liability, diplomatic tension, and midterm messaging. The durability of the revised framework depends on judicial outcomes and economic performance.

DHS SHUTDOWN, SAVE ACT & SYSTEMIC RISK:   The partial DHS shutdown has evolved from partisan leverage to operational concern. TSA disruptions risk economic spillover through travel and logistics systems, prompting bipartisan discussion of targeted stabilization measures. While immigration enforcement reforms remain the core dispute, operational continuity pressures are rising.  The SAVE Act remains stalled amid funding disputes, reinforcing the intersection between election law messaging and immigration politics. Administrative efforts to reassure lawmakers regarding ICE operations have not eliminated partisan distrust.  The shutdown illustrates institutional congestion: symbolic legislation, operational governance, and electoral messaging increasingly overlap, limiting pathways to durable resolution.

HEALTH POLICY:  Healthcare affordability and fiscal sustainability are now central midterm fault lines. The expiration of enhanced ACA subsidies has triggered substantial premium increases in competitive districts, exposing vulnerable Republicans and strengthening Democratic affordability messaging.  The Congressional Budget Office now projects Medicare’s Hospital Insurance Trust Fund will be exhausted in 2040, twelve years earlier than previously forecast. While insolvency remains years away, compression increases reform pressure.  CMS deferred roughly $260 million in Minnesota Medicaid funding over program integrity concerns and warned further deferrals are possible. This signals more aggressive federal oversight and raises federal-state confrontation risk.  Simultaneously, lawmakers are pursuing bipartisan Medicare physician reimbursement reform before temporary payment increases expire in 2026. Some House Republicans are exploring Medicaid FMAP adjustments through a potential second reconciliation vehicle.  Healthcare financing now intersects directly with electoral volatility.

FDA, CDC & VACCINE GOVERNANCE:  Public health governance remains unsettled amid leadership turnover and regulatory restructuring. The CDC continues to experience instability following senior resignations. Fifteen states have filed suit challenging vaccine schedule revisions, intensifying polarization.  The FDA will implement bonus incentives beginning April 1 to accelerate drug reviews while hiring over 1,000 scientists. It also formalized a plausible-mechanism pathway to expedite ultra-rare disease approvals. While intended to modernize responsiveness, these reforms occur amid scrutiny of scientific independence.  International criticism of U.S. mRNA research funding reductions adds reputational pressure. Regulatory modernization efforts are unfolding in a politically charged environment that complicates public trust.

DRUG PRICING:  The administration has urged Congress to codify international reference pricing for prescription drugs while promoting TrumpRx as an affordability solution. Congressional Republicans remain cautious, and Democrats question transparency and savings impact.  State-level pricing reforms continue to expand, reinforcing drug affordability as a bipartisan voter concern. Even without immediate legislative enactment, drug pricing will remain central to 2026 campaign narratives.

ENERGY:  The administration is pursuing an aggressive fossil-fuel expansion strategy while simultaneously confronting rising electricity prices driven in part by AI data center proliferation. At the State of the Union, President Trump announced a “ratepayer protection pledge” under which major technology companies would commit to covering the electricity costs associated with new data centers. While the pledge is not binding, the White House frames it as a novel strategy to insulate consumers from AI-driven grid strain. National retail electricity prices have risen approximately 6% year-over-year, reinforcing voter sensitivity to utility costs   The administration’s broader energy agenda centers on expanding fossil fuel production and reducing regulatory constraints. The Bureau of Land Management nomination of former Rep. Steve Pearce signals alignment with a “Drill, Baby, Drill” posture, including expanded development on federal lands and potential reconsideration of monument boundaries. Simultaneously, EPA actions to loosen mercury standards for coal plants and shift oversight of coal ash to states reflect a deregulatory trajectory.  Permitting reform remains stalled. Bipartisan negotiations to modernize environmental review processes are in limbo after disputes over renewable energy delays and offshore wind stop-work orders. While lawmakers agree on the need to expedite infrastructure and grid projects, durable compromise remains elusive.  Biofuel policy adds further tension. The EPA’s Renewable Volume Obligation guidance is expected in March, ending months of uncertainty for refiners and agricultural stakeholders. Congressional efforts to expand year-round E15 gasoline sales continue but face deadline slippage and inter-refinery equity disputes. 

CRYPTO & FINANCIAL REGULATION:  Digital asset policy is entering a more formalized regulatory phase as federal banking authorities move to integrate stablecoins and crypto platforms into the traditional supervisory framework. The Office of the Comptroller of the Currency has released a comprehensive implementation structure for the GENIUS Act stablecoin regime, establishing capital, liquidity, and risk management expectations for large non-bank issuers. The framework signals that stablecoin providers exceeding asset thresholds will face supervision standards similar to mid-sized financial institutions, narrowing the gap between fintech innovation and prudential oversight.  At the same time, Crypto.com has received conditional approval for a national trust charter, reinforcing the administration’s willingness to grant federal pathways for digital asset firms seeking regulated status. This development accelerates the shift away from fragmented state-by-state licensing models toward centralized federal supervision. Traditional banking institutions have raised concerns about competitive parity, arguing that crypto firms may benefit from lighter capital burdens or novel charter structures if guardrails are not applied consistently.  Regulatory expansion is unfolding alongside broader debates about financial stability and payment system modernization. Policymakers continue to examine how stablecoins interact with the banking system, Treasury markets, and consumer protection regimes. Questions remain about custody requirements, reserve transparency, systemic concentration risk, and whether stablecoin issuers could amplify liquidity shocks during periods of stress.  The Federal Reserve is also evaluating limited-access payment system models that could allow nonbanks more direct participation in clearing infrastructure. While not yet formalized, these discussions underscore the accelerating integration of digital assets into core financial plumbing.  Crypto policy now intersects with political messaging as well. Some lawmakers frame digital asset oversight as innovation-forward modernization, while others warn of regulatory arbitrage and consumer exposure. With election-year dynamics intensifying scrutiny of financial institutions and corporate consolidation, crypto regulation is increasingly viewed through both economic and populist lenses.The next phase will hinge on how aggressively supervisory standards are enforced and whether Congress codifies a broader statutory framework or leaves digital asset governance primarily within executive agencies.

LABOR, IMMIGRATION & WORKFORCE STRAIN:    Labor dynamics have re-emerged as a cross-cutting risk vector across healthcare, energy, and immigration policy. State-level restrictions on H-1B public-sector hiring in Texas and Florida threaten to constrain healthcare staffing pipelines and public institutional capacity. Hospitals and health systems warn that restrictions on high-skilled foreign workers could exacerbate workforce shortages already strained by demographic trends and burnout.  Immigration enforcement and DHS funding disputes are also affecting labor markets. Ongoing partial shutdown conditions create uncertainty for immigration processing, employment verification systems, and cross-border workforce mobility. Congressional debates over enforcement reforms and SAVE Act election provisions intersect with broader economic concerns about labor supply, particularly in agriculture, construction, and service sectors.  Energy and industrial policy initiatives likewise depend on skilled labor availability. Data center expansion, critical mineral development, and domestic manufacturing reshoring all require specialized workforce capacity. Tight labor markets increase cost pressure on these projects and may undermine industrial acceleration timelines.  In the healthcare domain, physician reimbursement reform and Medicare payment negotiations intersect with provider workforce stability. Payment uncertainty contributes to retention challenges in rural and underserved areas. Meanwhile, biofuel production expansion and refinery compliance debates also carry employment implications in agricultural states.Collectively, labor and workforce policy are no longer siloed from energy, healthcare, or immigration debates. Labor supply constraints, regulatory enforcement, and industrial expansion strategies are converging in ways that directly affect cost structures, service delivery, and electoral messaging around economic competence.

UKRAINE:  U.S.-brokered diplomacy around the Russia–Ukraine war intensified during the week, with Washington and Kyiv seeking to convert technical talks into a leader-level track while fighting continued. President Trump and President Volodymyr Zelenskyy held a direct call on February 25 ahead of renewed negotiations in Geneva, underscoring that the White House is treating the next round as a hinge point for sequencing: near-term confidence-building and process agreements first, then a push to elevate discussions to heads of state if momentum holds. Ukrainian officials have framed Geneva as a gateway meeting intended to clarify whether Russia will engage on verifiable steps rather than declaratory positions.  On the battlefield and in Ukraine’s rear, Russia sustained a high operational tempo of missile and drone attacks, continuing pressure on civilian infrastructure even as Ukraine reported that winter grid-collapse objectives were not achieved. Ukraine’s message remained that any diplomatic movement must occur in parallel with continued air-defense resupply and sustained economic support, with particular emphasis on interceptors for Patriots and other layered systems to manage the scale of drone saturation attacks.  Regional security dynamics in the Middle East complicated near-term planning for subsequent sessions. Talks previously associated with Abu Dhabi were described as potentially shifting to Switzerland or Turkey, reflecting both logistics and the broader geopolitical bandwidth constraints created by overlapping crises. Kyiv signaled concern that any prolonged diversion of Western air-defense assets or production capacity toward other theaters could tighten timelines for Ukrainian stockpiles, even if immediate deliveries remain intact.  Strategically, the week reinforced three realities. First, Kyiv is attempting to lock in a predictable negotiating structure that prevents “process drift” while Russia continues to prosecute the war. Second, the U.S. is using direct presidential engagement to increase leverage over timing and format, including the question of when leaders meet and under what preconditions. Third, Russia’s continued long-range strike campaign suggests it is not trading military pressure for diplomacy in the near term, raising the bar for what Kyiv and partners will require as proof of seriousness: enforceable pauses, monitored arrangements, and concrete mechanisms to prevent talks from becoming cover for renewed escalation.

CHINA:  The administration invoked statutory authority under Section 122 of the Trade Act of 1974 to impose a temporary 10 percent ad valorem import duty on a broad range of goods, intended to address fundamental international payment imbalances and rebalance aspects of the U.S. trade relationship. The proclamation, effective February 24 for 150 days, exempts certain critical minerals, energy products, agricultural goods, and sectors vital to domestic needs while preserving flexibility for sector-specific trade enforcement. This tariff action is explicitly framed as part of a broader strategy to stem capital outflows, incentivize domestic production, and create American jobs, while maintaining legally binding reciprocal trade agreements with key partners.  On the congressional front, the House Select Committee on the Chinese Communist Party led by Chairman John Moolenaar formally urged the Treasury Department to accelerate implementation of the Comprehensive Outbound Investment National Security (COINS) Act. The committee’s letter sought enhanced controls on U.S. capital flows and expertise that could strengthen the Chinese military-industrial base, underscoring bipartisan legislative pressure to tighten outbound investment screening.  Diplomatically, U.S. arms control officials presented declassified evidence alleging an underground Chinese nuclear test at a U.N.-backed forum in Geneva, pressing for greater transparency from Beijing in the wake of the recent expiration of the New START treaty. China rejected these allegations as politically motivated. 

2026 MIDTERM:   The 2026 cycle is entering a structurally volatile phase as early primary contests in Texas and North Carolina begin reshaping the battlefield for House and Senate control. In Texas, Senator John Cornyn faces a serious renomination fight against Attorney General Ken Paxton in what has become the most expensive Senate primary on record. Polling suggests Cornyn is unlikely to secure a majority outright, increasing the probability of a runoff and highlighting ideological pressure within the Republican base. A Paxton nomination could materially alter general election dynamics given his legal controversies and polarizing profile.  In the House, multiple incumbents face either primary or structural vulnerability. Republican Representatives Tony Gonzales and Dan Crenshaw confront competitive primary challenges, reflecting internal party tensions over ideology and leadership alignment. In Pennsylvania’s 7th District, Representative Ryan Mackenzie faces general election exposure tied to Affordable Care Act subsidy expiration and premium increases affecting swing voters.  Democratic incumbents are similarly exposed. Representative Don Davis in North Carolina now holds one of the most endangered seats following aggressive redistricting that shifted his district significantly toward Republicans. Representative Valerie Foushee faces a serious progressive primary challenge. In Texas, redistricting has increased general election risk for Representative Vicente Gonzalez. Representatives Al Green and Christian Menefee are locked in an incumbent-versus-incumbent primary, guaranteeing one Democratic loss. Representative Julie Johnson faces a competitive challenge from former Representative Colin Allred.  Beyond individual races, coalition shifts add uncertainty. Early reporting suggests some softening of Latino voter alignment with Republicans in South Texas, a region that delivered meaningful GOP gains in 2024. Even modest erosion could affect competitive House districts.  Democrats are consolidating around an affordability-centered strategy focused on health care, tariffs, and cost-of-living pressures. Republicans emphasize tax cuts, immigration enforcement, and cultural policy contrasts. With redistricting volatility, demographic realignment, and historically narrow congressional margins, early primary outcomes may have outsized influence on the balance-of-power trajectory heading into November.