Washington Insider -- Tuesday

By DTN's Washington Insider

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

Trump Budget Plan Again Proposes Pay Cap, Crop Insurance Changes

The Fiscal Year (FY) 2021 budget plan had a familiar feel to it Monday, including provisions that have been floated before by this and other administrations.

The administration included legislative proposals that would lower the adjusted gross income (AGI) limit to be eligible to obtain farm program payments to a maximum of $500,000. And the limit would apply to more benefits than just those under the farm program.

Plus, the administration said the separate pay cap for peanuts of $125,000 needs to go and there needs to be a limit of $125,000 per person on Marketing Assistance Loan (MAL) benefits.

On crop insurance, the administration proposes cutting the crop insurance subsidy on harvest price option (HPO) policies by 15 percentage points and by 10 percentage points on policies without the HPO. That item would save $21 billion over 10 years.

But the legislative proposals floated by the administration will not be picked up and ran with by lawmakers. However, the proposals indicate that the administration will keep this as a focus should Trump win another term in November.

So even though these proposed cuts are not expected to materialize, ag interests are on notice that this will be a recurring theme ahead.

The budget documents also make no mention that a 2020 Market Facilitation Program (MFP) is in the cards, with their projections showing that more than $9 billion under the MFP 2 effort for 2019 will still go out to producers in FY 2020.

As of late Monday, USDA had not updated their figures for funds paid out to farmers via the final installment of the MFP 2 payments.

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EPA Chief Comments on Court Case Impact on RFS

EPA Administrator Andrew Wheeler on Saturday said the recent federal court decision to vacate three biofuel small refinery exemptions (SREs) under the Renewable Fuel Standard (RFS) “has the potential of completely changing the small refinery program.”

The court struck down waivers for three refineries in Oklahoma, Utah and Wyoming, ruling that the EPA could only extend exemptions for plants that had continuously received waivers from their RFS obligations. The three plants in question had not been previously granted exemptions.

The agency is now “taking a close look at the 10th Circuit decision and the ramifications to the program,” Wheeler told AgWired in an interview, saying the agency would have something on that “shortly.” This is the first acknowledgement from EPA that the decision could have a significant impact on the SREs ahead..

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Washington Insider: Infrastructure Investment Discussed Again

The Trump administration budget proposalreceived a cool reception, as usual, although Bloomberg says there is talk now that the House Ways and Means Chairman Richard Neal, D-Mass., is “cautiously optimistic about a possible compromise with the administration.”

Neal said he is looking for a broader infrastructure deal--in spite of the far-reaching, major political differences involved.

Neal spoke with Treasury Secretary Steven Mnuchin on Friday to discuss the possibility of moving an infrastructure package that would be broader than the highway bill reauthorization President Donald Trump endorsed during his State of the Union address.

“I think we can go well beyond that,” Neal said, adding that he liked the option of reintroducing Build America Bonds to help pay for new projects. Still, he cautioned that the President would need to address Democrats’ concerns over climate change and noted that “any bill that includes infrastructure is going to have to include climate consideration.” He also said that specific agreements had not been reached yet.

“The good news is everybody wants to do infrastructure,” Rep. Tom Reed, R-N.Y., told Bloomberg. “Communications are occurring. But it’s been very difficult to get it to crystallize.”

Reed suggested that a more likely outcome was something along the lines of Trump’s campaign pledge to leverage private investment onto $1 trillion in new total infrastructure spending and cited an appetite among investors for government-issued bonds. However, Democrats have already dismissed that figure as unrealistic and insist that new direct federal spending “should drive infrastructure building.”

Mnuchin and the administration are claiming “new interest” in 50- or 100-year Treasury bonds, an idea floated on the 2016 campaign trail. The “Build America Bonds” were taxable municipal bonds created as part of the Obama administration’s 2009 economic-stimulus package, which included infrastructure repairs, Bloomberg said.

Speaker Nancy Pelosi, D-Calif., told a group of governors over the weekend that Neal is scheduled to meet again with Mnuchin this morning.

The overall budget proposal the administration is expected to release this week is expected to include an enormous $4.8 trillion package for the upcoming fiscal year including $1 trillion for infrastructure spending, modeled on combining legislation proposed by Sen. John Barrasso, R-Wyo., with a $200 billion fund for “nationally significant projects.”

The remainder of the funding would be made up of public-private partnerships and state and local spending, the administration has said. The White House would replenish the depleted Highway Trust Fund through cost savings in other areas of the budget.

One element of the expected proposal is a somewhat pared-back request for Mexican border wall construction. The request would be for $2 billion, down from $8.6 billion requested a year ago. Senior administration officials are telling the press that that with funding for 1,000 miles of wall already secured, less spending will be needed.

Bloomberg also noted that fiscal 2021 appropriations bills will not include earmarks, despite earlier support in the House Democratic caucus. House Democrats had discussed the possibility despite Senate Republican support for an indefinite ban on earmarks last year.

“In the end you have to have bicameral, bipartisan support for this,” Rep. David Price, D-N.C., said last week ahead of the decision to abandon an earmark revival for the rest of the 116th Congress. “You don’t want one side exploiting it politically.”

Bloomberg also reported that the United States has abandoned its antitrust probe of four automakers that sided with California over the administration’s fight over the future of fuel economy and emissions requirements. The inquiry had targeted Ford, Honda, BMW and Volkswagen over their agreement last year with California regulators to voluntarily meet the state’s targets for fuel economy and tailpipe emissions. The decision was seen as undercutting the administration’s plan to relax the national requirements and was decried by the administration at the time as a “PR stunt.”

California Gov. Gavin Newsom cheered the decision, calling it “a loss for the weaponization of federal agencies.” He argued that the effort was a “blatant attempt by the administration to prevent more automakers from joining California and agreeing to stronger emissions standards,” Newsom said.

So, we will see. Clearly, the coming budget fight will be highly contentious and possibly prolonged—although there seems to be no appetite now for shutting down the government. Still, many high-stakes proposals are on the table, to one degree or another, and should be watched closely by producers as they appear, Washington Insider believes.

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