Washington Insider -- Thursday

The Fight for Floodplain Construction Rules

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

Cuba Removed From FCC Exclusion List

Cuba has been removed from an exclusion list that required special U.S. government authorization for U.S. telecommunications firms to do business in the country via a decision by the Federal Communications Commission’s (FCC) has removed.

Only Sprint Corp. and IDT Domestic Telecom had previously sought and received approval from the FCC and State Department to offer telecom services to Cuba. The FCC’s latest move opens the doors for other U.S. telecoms, including Verizon Communications Inc. and AT&T Inc. to pursue new ventures in Cuba.

Any company can now begin direct communications with the Cuban state-run telecom, Empresa de Telecomunicationes de Cuba S.A. (ETECSA) about creating interconnection agreements. The change will not only affect telecommunications companies, but also opens the door to other “connected devices.” Companies including Medtronic Plc., maker of medical devices, say that the change will open new markets and capabilities for their products in Cuba.

Despite the new opening, negotiations by U.S. telecoms with ETECSA are expected to be difficult, especially considering that the company already has deals with other international carriers. Companies that wish to do business with ETECSA will be constrained by the Cuban government’s financial and other restrictions.

The long-term impact of the FCC’s decision will eventually make it easier for US-Cuba communications and for US tourists in Cuba to use the Internet, make phone calls and use their mobile devices while in the country.

The FCC’s International Bureau removed Cuba from the exclusion list, which had required special authorization to do business in the nation under Section 214 of the Communications Act of 1934. Cuba was the last remaining nation on the list.


CBO Sees Bigger Budget Shortfalls for 2016 and Beyond

The Congressional Budget Office’s (CBO’s) gloomier assessment of the government’s budget picture may complicate efforts by House Republicans to draw up a fiscal outline in the coming weeks. The nonpartisan CBO, in its annual look at the deficit and economic outlook, projected the first increase in the federal budget deficit this year since 2009 and raised its projection for cumulative deficits over the 10-year budget window, citing late-2015 deals to authorize higher highway program funding, boost limits on annual discretionary spending and extend many temporary tax breaks on a permanent basis. CBO said the 2016 deficit would rise to $544 billion, after falling to $438.9 billion in Fiscal 2015. In August 2015, CBO projected the 2016 deficit would instead fall further, to $414 billion.

Deterioration in the 10-year budget window, which now runs from Fiscal 2017 to 2026, was more surprising. While, in August, the CBO projected a 10-year gap of $7.01 trillion in the old window of 2016 to 2025, the new 10-year gap grew to $9.38 trillion. The public debt measured against the size of the US economy rose sharply as well, from 76.9% in 2025 in the August 2015 projections to 86.1% in 2026 in the new forecasts. Compared to the $7.007 trillion 10-year gap forecasted in August, the shortfall over the same 2016-2025 period is now about $1.5 trillion larger, CBO said. About half of that increase was due to legislation enacted in the latter part of 2015, including $425 billion in less revenue, the agency said. The other half was due to lower projected economic growth over that time period and an increase in projections for spending on Medicaid and veterans benefits.

CBO said it expected economic growth of about 2% from 2018 to 2020, and for the economy to expand at that pace in the latter years of the 10-year forecast as well. “That rate represents a significant slowdown from the average growth of potential output that was observed during the 1980s, 1990s, and early 2000s; the slowdown results largely from slower projected growth in the nation’s supply of labor,” the CBO said.

CBO projections for near-term economic activity were less gloomy, though still down from those released in August 2015. The CBO projected 2.7% GDP growth for 2016 and 2.5% in 2017. CBO also said it expected unemployment to fall further from the current 5%. “In its current projections, CBO expects slack to diminish over the next few years; for example, the agency projects that hiring will reduce the unemployment rate from 5% in the fourth quarter of 2015 to 4.5% in the fourth quarter of 2016, which would be temporarily below the estimated natural rate of unemployment (the rate that arises from all sources except fluctuations in the overall demand for goods and services),” the CBO said.

CBO said it expected inflation to rise to about 2% annually, close to the Federal Reserve Bank price target.


Washington Insider: The Fight for Floodplain Construction Rules

Inside Climate News is reporting this week on a budget dance that is somewhat strange, but interesting none the less. It is a little hard to follow, but it apparently happened.

It seems that Congress actually did take at least one step to deal with climate change in the FY2016 Budget Bill, but only briefly, ICN says. The administration’s plan to reduce at least by a little the national economic exposure to flood risk due to climate change was quietly green-lighted by Congress in last month’s 2016 omnibus budget bill.

That was one of the only actions Congress took on global warming in all of 2015. It was intended to affect billions of dollars of federally funded construction projects across the country, from highways and bridges to hospitals and housing complexes, at a time when US flooding seems to be getting worse because of climate change.

“The policy illustrates awareness that we should not build things that are vulnerable to flooding now or in the future,” said Rob Moore, a policy analyst and director of the Natural Resources Defense Council’s Water and Climate Team.

Obama’s executive order on the matter mandated that all federally funded projects located in a floodplain be built higher and stronger than previously required. It applies to both new construction and rebuilding following a disaster.

The old standards had been enacted by President Jimmy Carter in 1977. Under the President’s new executive order, buildings must now be elevated 2 or 3 feet above the 100-year flood level (the higher standard is for “critical” infrastructure, like hospitals). A third option is for federal agencies to analyze future climate change scenarios and build according to those projections of events like sea level rise or expected heavier rain events in some areas.

Flooding accounts for about 85% of all U.S. disaster declarations damages and exceeded $260 billion in total costs between 1980 and 2013. There were three billion-dollar-plus flooding disasters in 2015 and thousands of homes and businesses along the Mississippi River and its tributaries rang in the New Year under water after unusual heavy winter rains.

“Recent flood events are putting more attention on this very matter,” said Roy Wright, who leads disaster risk-reduction efforts for the Federal Emergency Management Agency.

Scientists expect that the problem will only get worse as seas rise aand warmer temperatures fuel stronger rain events. Heavy rainstorms and flooding that historically happened once in 20 years are forecast to occur as frequently as every 5 to 15 years by the second half of this century, according to the National Climate Assessment.

However, ICN noted that politics intervened quickly after the President’s executive order updating the policy was issued last January. “Suddenly, because the update had the words ‘climate’ and ‘change’ in it, it became a partisan issue,” Moore said. Eight Republican senators, all from states that are among the most flood-prone in the nation, such as Texas and Louisiana, wrote to the president questioning the legality of the new restrictions.

Two of the signees were Thad Cochran of Mississippi and Roy Blunt of Missouri, chairman and a member of the Senate appropriations committee, respectively. “The federal government should work for the American people—not the other way around,” Blunt said in July. “The Obama Administration’s order overreaches into flood risk negotiations between Missouri’s small businesses, local governments, and private property owners, impacting projects receiving federal funding in the floodplain.”

Within months of the letter, budget riders were included in three appropriation bills, including the Department of Homeland Security, defunding the new flood risk standard. “None of the funds made available by this or any other Act may be used to implement, administer, carry out, modify, revise, or enforce Executive Order 13690,” the bills said.

“As so many things go right now in this hyper-partisan atmosphere, it feels like flood risk policy got caught up in that,” said Chad Berginnis, the executive director of the Association of State Floodplain Managers.

After the first riders appeared, environmental groups and flood policy experts began meeting with politicians from both parties to explain the standard and its benefits. And, in December, buried on page 605 of the 2016 omnibus bill, Congress approved the program by tweaking the omnibus rider that said that “no federal funds can be used to implement the standard acquired a qualifying statement “other than for—”, and went on to list nearly all of the activities in Executive Order 13690.

Floodplain managers, local officials, developers and policy experts “have learned over the last 40 years that building to just the 100-year flood level is not adequate,” said Berginnis. “They are increasingly comfortable with building to 500-year standard and looking at future risk. This is actually the federal government catching up.”

It is hard to know what to make of all this. Clearly, it makes sense to recognize the need for tighter floodplain construction standards, and rules of this sort were formerly bipartisan, observers note. Nowadays, this sort of heavy reliance on back-door operations certainly raises questions regarding the effectiveness of dealing with future infrastructure protections and needs, a concern that should be watched carefully as the Congress moves to consider future appropriations Washington Insider believes.

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