Washington Insider -- Monday

Working to Avoid the Next Shutdown

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

Sen. Stabenow Questions Whether CCC Has Enough Funding To Start Implementing MFP 2

Sen. Debbie Stabenow, D-Mich., remains skeptical the Commodity Credit Corporation (CCC) has enough funding for initial Market Facilitation Program 2 (MFP 2) payments. She expressed that view during a Senate Agriculture Committee hearing Thursday (June 13).

CCC funds will replenished later this year as the Fiscal Year 2020 appropriations funding process is expected to provide sufficient leeway for USDA to execute the $16 billion MFP 2 package. Still, Stabenow questioned whether USDA can come up with the $16 billion. She said USDA only has about $7.7 billion in additional spending authority through its CCC account.

"Are you going to assume Congress will authorize an additional amount?" she asked. USDA Chief Economist Rob Johansson said there should be no problem because the CCC’s $30 billion in annual spending authority will be replenished at the start of the fiscal year, which begins Oct. 1.

Tentative plans are for the Trump administration to release around 50%, ($8 billion), of the MFP 2 plan in August; with another 25% ($4 billion) in December and the last 25% ($4 billion) in February. The second and third installments would be contingent on ongoing trade policy discussions, USDA Secretary Sonny Perdue has said.

The timing of USDA’s coming FY 2020 appropriations is still unclear, with sources signaling an eventual spending package approval or a continuing resolution (CR) prior to Oct. 1. A continuing resolution (CR) could contain additional funding for the CCC should that be needed. USDA could also repurpose some existing funding to the CCC if needed, sources indicate.

USDA Selects Kansas City Region to Host ERS, NIFA

Selection of the Kansas City region to serve as the new home for the Economic Research Service (ERS) and National Institute of Food and Agriculture (NIFA) was announced Thursday (June 13) by USDA Secretary Sonny Perdue.

A promised cost-benefit analysis was also released by USDA, showing savings from the move of $300 million over a 15-year lease term – or roughly $20 million per year. Besides the savings, Perdue cited the region's strong ties to the agriculture sector, proximity to multiple land-grant universities and a robust labor talent pool as key factors that drove USDA's decision.

State and local governments in the Kansas City region also "offered generous relocation incentives packages totaling more than $26 million," Perdue noted, though he declined to elaborate on the details of those incentives in a call with reporters after the announcement.

Ultimately, the fate of the relocations is in Congress' hands and many lawmakers – especially Democrats – remain skeptical or even hostile to the proposal. Already, Congress included provisions in the Fiscal Year (FY) 2019 spending plan seeking a pause on the effort, and a similar provision is currently included in the FY 2020 USDA appropriations bill making its way through the House.

Washington Insider: Working to Avoid the Next Shutdown

The Washington Post reported late last week that Senate Republicans and the administration are struggling to reach an agreement on critical budget and spending issues that could not only threaten another government shutdown and deep spending cuts but lead to a “federal default that could hit the economy hard.”

GOP leaders have spent months cajoling President Trump in favor of a bipartisan budget deal that would fund the government and raise the limit on federal borrowing but their efforts have yet to produce a deal the Post says. And the uncertain path forward has been underscored by “budget meetings between key Senators and senior White House officials that excluded Democrats – whose votes will be needed to avoid a shutdown and an economy-shaking breach of the federal debt limit.

The GOP dysfunction along with a new House Democratic majority with its own priorities leaves the sides much farther apart than they were at this point in last year’s budget process, which ended in a record-long government funding lapse. At the time, Republicans controlled both chambers of Congress, but negotiations stalled over funding Trump’s immigration priorities.

Trump and Congress now face a trio of difficult budget issues. Congress must pass, and the President must sign, funding legislation by Oct. 1 to avoid a new shutdown. It also will be necessary to raise the federal debt limit around the same time. And by year’s end, they also need to agree on how to lift austere budget caps that will otherwise slash $125 billion from domestic and military programs.

Senate Republicans and the administration thus far have not agreed on how to proceed on any of the issues. In addition, tensions between key Senate Republicans and White House acting chief of staff Mick Mulvaney have been on display for months and GOP lawmakers and aides partially blame that frayed relationship for the halting pace of talks.

Mulvaney was a member of the conservative House Freedom Caucus before he joined the administration, first as White House budget director before becoming acting chief of staff and he has advocated dramatic spending cuts opposed by lawmakers of both parties.

Mulvaney has been slow to come around to the need for a bipartisan budget deal that would raise domestic and military spending caps even after McConnell met privately with the President last month and got his blessing to proceed with such a deal.

According to administration officials and Senate GOP aides, Mulvaney and the administration favor continuing existing spending levels or striking a one-year deal, over reaching the kind of two-year deal that has been agreed to in the past and that lawmakers in both parties favor now.

The administration also has pushed for raising the debt limit as soon as possible, while House Speaker Nancy Pelosi, D-Calif., has made clear that a vote on the debt limit is off the table until a spending deal is reached. Senate Republicans, too, favor including the debt limit in a broader spending deal but some complain that they still don’t know exactly what the White House will support when it comes to any of the financial issues they’re confronting.

Senate Republicans and top aides have voiced frustrations with Mulvaney publicly and privately in recent weeks with regard to the disaster bill talks. When asked whether Mulvaney was playing a “constructive role” in talks Shelby said that Mulvaney was playing “a role.”

The internal GOP disarray has provoked repeated criticisms from Democrats. “Let’s hope the Republicans can get their act together,” Senate Minority Leader Charles Schumer, D-N.Y., said in a recent interview.

In addition, if a deal is not reached to lift automatic “sequester” spending caps the resulting cuts would indiscriminately slash vital domestic programs and jeopardize military readiness, members of both parties warn. And the Treasury Department is already employing cash-saving tactics, called “extraordinary measures,” because Congress has failed to act to raise the nation’s borrowing limit.

If Congress does not act and Treasury defaults on the government’s obligations, the result could include a spike in interest rates, a surge in unemployment and a stock market crash. Fitch Ratings warned earlier this year that a shutdown coupled with a battle over the debt limit might damage the country’s Triple-A credit rating.

Lawmakers and administration officials say they are aware of the urgency to act. But recent interactions between Congress and the White House have not been confidence-inspiring. The sweeping $19 billion disaster aid bill that recently became law did so only after months of partisan bickering.

House Democrats have gone their own way on spending bills without Republican buy-in. A bipartisan agreement in the Senate that helped Congress make unusual progress passing spending bills last year — up until the dispute over the wall — has not been resurrected this year, and the Senate Appropriations Committee has not yet passed a single spending bill.

This is one of many intensely partisan debates over a looming presidential campaign and “collateral issues. A messy stew of the most basic requirements of governing,” according to Sen. John Cornyn, R-Texas. They also are among the bitterest in recent memory and should be watched especially closely by producers as they evolve, 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 U.S. Ag Policy, U.S. Farm Bill and DTN Ag News sections on their News Homepage.

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