Washington Insider -- Tuesday

Entitlement Cuts Proposed

Here’s a quick monitor of Washington farm and trade policy issues from DTN’s well-placed observer.

USTR Wants Data on Expanding NAFTA Agriculture Tariff Cuts

Shortly after informing Congress that he will renegotiate the North American Free Trade Agreement (NAFTA), U.S. Trade Representative Robert Lighthizer requested a new investigation examining what would happen if the agreement were changed to further liberalize trade in certain agricultural goods.

Meanwhile, Lighthizer over the weekend was in Hanoi, Vietnam. "Our view as an administration is that we can take actions to stop unfair trade in the U.S. market. There are also a lot of, an enormous amount of non-economic capacity around the world and barriers to trade," he said at the APEC press conference. "The question again is, what steps can be taken to really lead to free trade and to the extent those steps are confused with protectionism we find that unfortunate."

"Our view is we want free trade, we want fair trade,” Lighthizer said. “We want a system that leads to greater market efficiencies throughout the world," he added. "That's really the underlying objective of organizations like this and the WTO and others. It's in all of our interests to get to that end. The question is what do you do to get there? For us, it's to defend against unfair trade in our market."

Lighthizer held formal bilateral meetings with his counterparts from Canada, Japan, Mexico, Vietnam, China and Australia.

US Citrus Group Seeks Court Block of USDA Lifting Ban on Argentine Lemons

Blocking USDA's decision to lift an import ban on lemons from northwest Argentina has been requested by the U.S. Citrus Science Council (USCSC) in U.S. District Court for the Eastern District of California.

USCSC argued that USDA's Animal and Plant Health Inspection Service (APHIS) violated the Administrative Procedures Act (APA) when it issued a rule that lifted a long-standing ban on lemons from the northwest region of Argentina. The council is asking the court to block the imports and make APHIS start over.

APHIS found the lemons could be imported to the US with little risk of spreading disease under a system of enhanced sanitary measures and inspections. The Trump administration twice delayed implementing the Obama-era rule that lifted the ban. The rule was originally scheduled to have taken effect in January, but ultimately announced it would let it come into effect May 26. It would only allow Argentine lemons to enter the northeastern US for 2017 and 2018.

USCSC alleged the government did not provide the public with enough information about an APHIS site visit to Argentina, a key to the agency's decision, and did not address industry arguments about how invasive pests could be transferred from urban areas to commercial farming locations. “It is obvious that political considerations outweighed the basic administrative process and science,” Richard Pidduck, chairman of USCSC, said in a statement.

USDA rejected USCSC's assertions. “APHIS made this decision because our extensive review and analysis of the science shows that importing Argentine lemons can be safely done while protecting US agriculture from plant pests. APHIS is reviewing the lawsuit and will not comment on pending litigation,” a USDA spokesman said in a statement.

Washington Insider: Entitlement Cuts Proposed

Bloomberg is reporting this week that the coming budget wars are likely to get a great deal hotter in the near future. It says the President plans to propose $1.7 trillion in cuts to a category of spending that includes major social and entitlement programs for lower-income Americans as part of an effort to balance the budget within a decade.

The White House request is expected today and will include $274 billion in cuts over 10 years to means-tested anti-poverty programs, including food stamps. Bloomberg says the administration has prepared talking points for Republicans on Capitol Hill touting that the “budget strives to replace dependency with the dignity of work through welfare reform efforts.”

In fact, the war has already begun and the upcoming budget request for fiscal 2018, which includes dropping the top individual tax rate to 35 percent, is already attracting criticism from Democrats. Trump’s proposal will also call for $800 billion in cuts to Medicaid, the health program for the poor, the Washington Post reported.

“This budget continues to reveal President Trump’s true colors: His populist campaign rhetoric was just a Trojan horse to execute long-held, hard-right policies that benefit the ultra-wealthy at the expense of the middle class,” Senate Minority Leader Chuck Schumer, D-N.Y., said in a statement Sunday.

During the presidential campaign, Trump promised not to cut Social Security, Medicare or Medicaid, Bloomberg says, but he “has already broken that promise on Medicaid by backing cuts to the program called for under the Obamacare repeal bill passed by the House on May 4.” The White House has said that the president intends to keep his pledge on Medicare benefits and Social Security retirement benefits, Bloomberg said.

Trump is proposing to cut $193 billion from the Supplemental Nutrition Assistance Program over the next decade. The cuts, which would amount to an approximate 25% reduction, would be achieved in part by limiting eligibility for food stamps and by requiring work. Further, the Trump administration plans to shift some of the costs to the states, as DTN reported Monday.

Spending on the Earned Income Tax Credit and Child Tax Credit would also be reduced by $40 billion, in part by requiring proof that recipients are authorized to work in the U.S. Traditional welfare payments, known as Temporary Assistance for Needy Families, would be cut by $21 billion.

The budget is also expected to propose major domestic discretionary spending cuts; an earlier version of the budget called for $54 billion in such cuts next year alone, although Republicans in Congress have already rejected many of them.

Trump won’t likely get any help from Democrats cutting food stamps, which are up for reauthorization in the 2018 farm bill, Bloomberg thinks. “A budget is a statement of our values as a nation,” House Minority Leader Nancy Pelosi said in an emailed statement Monday. “Gutting this critical safety net initiative by more than a quarter is cruel and short-sighted, and is sure to receive bipartisan condemnation from Capitol Hill.”

In an interview with Bloomberg News last week, Senate Majority Leader Mitch McConnell, R-Ky., said Congress would ultimately write its own budget and reiterated his opposition to significant reductions in medical research and the State Department budget.

The White House document claims that Trump’s tax plan will provide “one of the biggest business and middle-class tax cuts in history” and will also eliminate loopholes and deductions. It reiterates that Trump wants to shrink individual income tax rates into three brackets of 10%, 25% and 35%.

Well, the budget fights with all their many implications, will certainly be controversial and may test the long held proposition that the nutrition programs are an essential part of a coalition necessary to support expensive ag safety net programs in upcoming farm bills.

In addition, the entitlement cuts now being discussed most likely will be seen as undercutting any efforts to reduce income inequality, as will the House proposal for a border equalization tax that could raise consumer costs, if it appears. All these could be added to the health care fight that seems to be brewing for this summer as the overall administration economic package emerges.

So, there is a lot to sort out in order to even identify what the budget, tax and safety net fights are all about. This is a battle that will involve producers in a central role, and which should be watched carefully as it proceeds, Washington Insider believes.

Want to keep up with events in Washington and elsewhere throughout the day? See DTN Top Stories, our frequently updated summary of news developments of interest to producers. You can find DTN Top Stories in DTN Ag News, which is on the Main Menu on classic DTN products and on the News and Analysis Menu of DTN’s Professional and Producer products. DTN Top Stories is also on the home page and news home page of online.dtn.com. Subscribers of MyDTN.com should check out the US Ag Policy, US Farm Bill and DTN Ag News sections on their News Homepage.

If you have questions for DTN Washington Insider, please email edit@dtn.com