Washington Insider-- Friday

By DTN's Washington Insider

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

White House Threatens Veto of Bills Requiring Greater Analyses of Regulation Costs

White House advisers would recommend that the president veto two House bills that would require federal agencies to give greater weight to the costs imposed by their regulations.

An "unfunded mandates bill," introduced by Rep. Virginia Foxx, R-N.C., would require agencies to conduct more detailed analyses of how their regulations would affect the economy and how they impose unfunded federal mandates on states and other parties. A separate "regulatory flexibility" measure, introduced by House Small Business Committee Chairman Steve Chabot, R-Ohio, would require federal agencies to consider not just the direct effects of their rules but also the indirect economic effects those rules might have on small businesses.

The White House Office of Management and Budget, in issuing its veto threats, said the unfunded mandates measure duplicates executive orders issued earlier by President Obama, which directed agencies to give more consideration to costs during regulatory development, particularly the effects on small businesses. OMB also said the regulatory flexibility measure would "create needless grounds for judicial review and judicial remedies" and needlessly expand the use of small business review panels.

The House may go forward with the two proposals, but their fate in the Senate does not appear promising, given that Democrats could filibuster the bills to death.

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Congress Seen Unlikely to Provide Additional $110 Million for FDA

The president's fiscal 2016 budget calls for an additional $109.5 million in new spending authority for the Food and Drug Administration. Most of that funding would go toward implementing new food safety regulations under the Food Safety Modernization Act (FSMA). However, with federal funds perennially in short supply, appropriators appear uncertain whether the request can be met.

If granted, the request would boost FDA's spending authority to $4.9 billion for the fiscal year that begins next Oct. 1.

FDA and public health and consumer advocates make the case that fiscal 2016 is a critical year for FSMA, which expanded FDA's food safety authorities so it could shift the focus from responding to foodborne illness outbreaks to preventing them. There currently are currently seven FSMA regulations that have court-ordered finalization deadlines beginning in 2015, including those that affect food manufacturers, importers and the produce industry.

Members of Congress generally favor a clean, safe supply of food and beverages for U.S. consumers. Whether they will be willing or able to raise the money necessary to pay for a safer food supply remains to be seen.

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Washington Insider: Administration Spending Cut Proposals

The administration is following up now with policy proposals made in the State of the Union address and in its budget proposal. Earlier this week, the president outlined about $25 billion in "discretionary spending" for USDA, which must be approved by Congress during the appropriations process, and $131 billion in mandatory spending.

Mandatory outlays include the federal crop insurance costs for the government are seen running about $9 billion annually, far higher than earlier expected. In response, the administration proposal for FY2016 would trim insurance costs to save an estimated $16 billion over the next decade.

In defending the proposal, Agriculture Secretary Tom Vilsack suggested that the administration's proposed savings were, in part, designed to counter larger than expected payouts from new commodity programs in the law that replaced direct payments. These include the new Agriculture Risk Coverage and Price Loss Coverage programs.

"One of the challenges of passing a farm bill was creating sufficient savings," Vilsack told the press. "It was anticipated that we would spend a significant amount on crop insurance but less on other safety net programs compared to direct payments. But as prices for crops have come down rather precipitously in the last 12 months, it's anticipated we're going to have to spend a lot more on ARC and PLC."

Specifically, the administration wants to trim by 10 percentage points federal subsidies for some crop insurance premiums. The requested 2016 budget for crop insurance would be $8.2 billion, slightly less than the $8.8 billion total cost in 2014.

Vilsack said the savings would help USDA stay within the 2014 bill's spending limits since low market prices for corn and other major crops seem likely to increase payouts for new farm bill price loss and revenue protection programs by $1 billion to $1.5 billion over the next 12 to 18 months. "If you want to stay generally within the budget savings identified for that safety net, you have to make some adjustments," he said.

In spite of Vilsack's arguments, there was a noticeable lack of enthusiasm among lawmakers about the proposals — partly because they come from the administration, but mainly because many ag constituents now face reduced revenues from crops. And, the lawmakers have a record of rejecting proposals that would reduce premium subsidies.

Sen. Pat Roberts, R-Kan., chair of the Senate Agriculture Committee told the press he won't be embracing the proposed cuts. "We have seen these types of proposals from this administration before and Congress has been right to ignore them," he said.

"That's a non-starter for us," House Ag Chairman Mike Conaway, R-Texas, told the National Association of State Departments of Agriculture winter policy conference. "It's unacceptable."

While ag leaders are unified in declaring the administration proposal "dead on arrival," they are having a somewhat harder time ignoring the sticker shock that is greeting the new Congressional Budget Office baseline numbers. As a result, press reports indicate that some senators are independently taking aim at the federal crop insurance premiums.

For example, Sens. Pat Toomey, R-Pa., and Jeanne Shaheen, D-N.H., introduced legislation that would cap the federal share of crop insurance premiums to a maximum of $50,000 a year for large farm operations. A similar effort during the most recent farm bill debate did not get a vote, but the new cost estimates may have changed at least some minds regarding such efforts. Shaheen and now retired Sen. Tom Coburn, R-Okla., had proposed capping the federal share of premiums to $70,000 per farm for a 10-year savings of $1 billion.

While the administration proposal aims squarely at the criticism that the new programs shift too much production risk from producers to the public, it has a poor record of pursuing that argument — so, most skeptics expect such efforts to come to naught again this year.

However, this time around, the budget hawks are firmly in control of the Congress and farm Act red ink seems certain to attract significant attention, if not in the form of the current budget proposals, perhaps from new congressional efforts to the same end.

This implies new controversies that could have far reaching implications for ag producers, Washington Insider believes.

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(GH/CZ)

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