Washington Insider -- Wednesday

The Budget Impact Debate

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

Key USDA Programs Proposed for Major Cuts or Elimination

President Donald Trump's proposed budget suggests cuts and requests elimination of programs impacting USDA, proposals which are expected to garner a lot of bipartisan opposition in Congress:

Overall: Trump administration is proposing to fund USDA at $137 billion for Fiscal Year 2018, a 21% cut to discretionary funding from current levels and an 8% reduction overall. Administration is requesting nearly $21 billion in discretionary funding and $116 billion in mandatory funding. The Fiscal 2017 omnibus enacted earlier this month provides USDA and its programs with $20.9 billion in discretionary funding and $132.5 billion in mandatory funds.

Staff reduction: Overall reductions in the proposed USDA budget could lead to a 5.5% staffing reduction affecting an estimated 5,263 positions, and the closing of 17 Agricultural Research Service labs.

Mandatory programs: Cut by 6% overall via new restrictions on Supplemental Nutrition Assistance Program (SNAP) eligibility and via limits to crop insurance premium subsidies and crop-support payments to farmers making $500,000 or less in adjusted gross income.

Administration is requesting $73.6 billion for SNAP in Fiscal 2018, down from the $78.5 billion funding levels of Fiscal 2017. The SNAP reductions would produce $193 billion in deficit savings from 2018 through 2027, according to summary tables. The full 2018 budget says the administration wants to phase in food stamp cost-sharing with states from 2020 through 2023.

Administration proposed to cap crop insurance premium subsidies at $40,000 per farmer; limit eligibility for payments from commodity crop programs to producers with adjusted gross incomes of $500,000 or less; limit eligibility for the federally subsidized crop insurance program to farmers with adjusted gross incomes of $500,000 or less; and end subsidies for the harvest price option for crop insurance. Under harvest price, farmers with the option can choose to receive payouts calculated on the higher of two prices, a pre-set contracted price or the crop price at harvest time. The budget document says ending federal premium subsidies for the harvest price option “maintains crop insurance for low yields and low prices.” The administration argued the $500,000 adjusted gross income cap to qualify for crop insurance, conservation and commodity payments is defensible to taxpayers because it is “hard to justify providing assistance to farmers with incomes over half a million dollars.”

Some programs eliminated: Including the Market Access Program, the Foreign Market Development Cooperator Program, the Biomass Crop Assistance Program and the Specialty Crop Grant Program.

Conservation cuts: The Conservation Reserve Program would remain capped at 24 million acres under the budget, which also would eliminate certain incentives under the program. The administration wants to make a 21% cut to Conservation Technical Assistance — which provides help to farmers looking to take up better conservation practices — and eliminate the Regional Conservation Partnership Program. Shortcomings in government conservation efforts would be made up for through "a greater role by the private sector in conservation planning in coordination with NRCS, which will provide training and certification for private entities to support development of specialized conservation plans," according to USDA's budget.

Lighthizer Stresses Bilateral Trade Deals at APEC Meeting

An emphasis on pursuing bilateral trade deals and rejection of any notion that the U.S. might rejoin the Trans-Pacific Partnership (TPP) was delivered by U.S. Trade Representative (USTR) Robert Lighthizer at a recent Asia Pacific Economic Cooperation (APEC) meeting.

For his first weekend as USTR, Lighthizer sat at the back of a stage with 20 foreign counterparts, saying the U.S. market was “attacked” by unfair trade and he would negotiate with them not as a group, but one by one. The trade officials were in Hanoi, Vietnam for an Asia Pacific Economic Cooperation (APEC) meeting, which yielded few solid deliverables for multi-country deals like the Trans-Pacific Partnership (TPP).

The 11 remaining TPP countries said they would draw up an analysis by this November to finalize the trade bloc. They also left the light on for the U.S. to return. In the afternoon, Lighthizer soundly ruled out any US return to the Pacific pact, which the U.S. left in January. “TPP-11 can make their own decisions. The United States makes its decisions,” he said in an APEC press briefing. “That's what sovereign nations do. But we certainly expect to stay engaged.”

He was equally unequivocal about only cutting deals with one country at a time. Lighthizer said he had “delightful” bilateral talks on the margins of the APEC gathering, in response to a question from Bloomberg BNA. “Many people have said, you don't want to go bilateral because it's too much trouble,” he observed. “Well, it's not too much trouble.”

Despite the talk of a revived TPP, the meeting ended with no clear appetite for new countries to ratify the accord. Japan and New Zealand ratified TPP before sending delegates to APEC Vietnam. Trade ministers released a statement May 21 that they would work to bring the Pacific agreement “into force expeditiously,” but stopped short of pledging to enact a TPP-11.

Washington Insider: The Budget Impact Debate

As was widely expected the FY 2018 budget details proposed this week for several key safety net programs are stimulating considerable angst and intense debate.

Making low-income Americans work to qualify for so-called welfare programs is a key theme of the administration budget proposal, the Washington Post says. “If you are on food stamps and you are able bodied, we need you to go to work,” said budget director Mick Mulvaney during a White House briefing on Monday.

Anti-poverty advocates told the Post that the White House could implement its desired reforms to SNAP in two ways: require recipients to work more than the current minimum of 20 hours a week, or cut the unemployment waivers in areas with high joblessness rates.

The influential Heritage Foundation, as well as a number of House conservatives have championed a crackdown on waivers, leading many anti-poverty advocates to conclude that is the most likely way the White House would implement its proposed reforms.

Robert Rector, a senior research fellow at the Heritage Foundation who has asked the White House to prioritize work requirements, said the Trump administration needs to “go after” the four million able-bodied adults without dependents in the food stamp program.

Critics say such a change could endanger participants – including veterans — who have been unable to find a job after an injury. The Post says veterans are among several thousand former food stamp recipients who lost benefits when Maine, in 2015, declined to renew its waiver and reinstated statewide work requirements.

The Trump administration is considering other changes to SNAP. While details remain sparse, Mulvaney said the federal government would be asking states to share in the costs for the food stamps program, through a phased-in “state match” so they have a “little more skin in the game.”

The Post says that suspending employment waivers would hit hard in areas with high unemployment such as southern and central California, where the unemployment rate can spike as high as 19 percent, as well as cities such as Detroit and Scranton, Pa., where joblessness remains rampant. The change would also hit hard in large portions of New Mexico, Oregon, Washington, Georgia, Kentucky, Tennessee, West Virginia, Idaho and Michigan.

Critics say the changes in unemployment waivers would be devastating for Native American families living on reservations in North and South Dakota, Arizona and Montana where there is chronic poverty and high unemployment. “The President’s budget proposal will force kids in rural America to go hungry while wasting billions of taxpayer dollars on misplaced priorities like a wall that won’t keep us safe,” Senator Jon Tester, D-Mont., told the Post. “Parents in Montana and across Indian Country should not have to choose between food for their tables, gas for their cars, and shoes for their kids.”

The number of Americans on SNAP remains high, however. In 2016, 44 million Americans receive the benefits, compared to just 28 million people in 2008. “They have not come down like we would expect them to do,” Mulvaney said. “That raises a very valid question: Are there folks on SNAP who shouldn’t be?”

Anti-hunger advocates argue that, generally speaking, there are not. Because SNAP benefits decrease gradually with increased income, there is no incentive for people to avoid work to get benefits — a phenomenon economists call the “welfare cliff.” And benefits are too small for people to subsist on them without working: The average food stamp benefit was $465 a month for a family of four in 2015. Most people are on the program for between seven and nine months on average.

“The notion that people would prefer not to work to get that benefit, give me a break,” said U.S. Representative Jim McGovern, D-Mass., a longtime anti-hunger advocate. “This is a lousy and rotten thing to do to poor people.

The evidence that stricter work requirements actually cause people to get jobs is mixed, at best, the Post says. In Kansas, which reinstated the requirements in October 2014, 40 percent of unemployed adults were still unemployed a year after being kicked off SNAP. Among those who found jobs, the average annual income was only $5,562, according to the Foundation for Government Accountability, a right-wing think tank based in Florida.

McGovern, who sits on the House Agriculture Committee, said he was surprised to learn about the White House proposal given Agriculture Secretary Sonny Perdue’s testimony before the committee last week saying he did not favor any major changes to the food stamps program.

“It’s been a very important, effective program,” Perdue said, according to a recording of the hearing. “As far as I’m concerned we have no proposed changes. You don’t try to fix things that aren’t broken.”

So, we will see. SNAP has been the focus of administration budget-cutting efforts before, and has generally escaped many of the deepest cuts proposed—and many aggies would go to some lengths to avoid yet another prolonged “welfare reform” battle. Like it or not, these are important to agriculture, as Secretary Perdue knows. Thus the SNAP battle is one producers should watch carefully as it proceeds, Washington Insider believes.

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