Washington Insider -- Monday

Debt Ceiling Wars

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

Environmental Groups Seek EPA Documents on WOTUS Meetings

Release of Environmental Protection Agency (EPA) documents from meetings with states and business groups on plans to rewrite a the Waters of the U.S. (WOTUS) rule is being sought by environmental groups who have filed suit to compel the agency to supply the documents.

The Center for Biological Diversity (CBD) sued EPA June 1 for ignoring a March 22 Freedom of Information Act (FOIA) request seeking the documents on the agency's plans for revising the WOTUS rule. The lawsuit was filed in the U.S. District Court for the District of Columbia.

At issue are briefing documents EPA used in “closed door meetings” in March with representatives of states and industry groups about the agency's forthcoming plans for “weakening wetlands protections under the Clean Water Act,” according to the CBD. EPA had 20 days to respond to the FOIA request but did not even though it acknowledged its receipt, according to CBD attorney Brett Hartl.

Records relating to EPA Administrator Scott Pruitt's involvement with the regulation are also being sought as Oklahoma -- where Pruitt served as attorney general before being tapped to head up EPA -- has challenged the regulation. Pruitt issued a memo in May pledging to sit out lawsuits involving Oklahoma. The environmental group wants to determine whether he has violated that ethics agreement.

EPA and the U.S. Army Corps of Engineers are under a presidential executive order to rewrite the 2015 rule that at least 31 states and a myriad of business, industry, and manufacturing groups are challenging on grounds that it improperly expanded federal jurisdiction over local land use decisions, among other things. Environmental groups also challenged the rule, seeking a more protective regulation.

The rewrite will involve a two-step rulemaking, with the first step expected “very soon,” Don Parrish, senior regulatory relations director for the American Farm Bureau Federation (AFBF), told the Texas Farm Bureau radio May 31. The first step, which is currently going through interagency review, would involve withdrawing the 2015 rule along with its justification. Next, the Trump administration would outline its rationale for rewriting the rule by considering the late Supreme Court Justice Antonin Scalia's reading of the CWA.

US Ag Trade Surplus Dropped in April As Exports Fell

U.S. agricultural exports fell to a value of $10.8 billion in April, down from $12.43 billion in March against imports of $10.32 billion which were down from $10.88 billion in March, paring the U.S. agricultural trade surplus for April to $483 million, down $1.1 billion from March, according to USDA's U.S. Trade Data Update.

The U.S. agricultural trade value is the smallest since July when it was $10.64 billion and the first total below $11 billion for Fiscal 2017. Ironically, even though imports fell in value for April, they stayed above $10 billion, marking the first time in USDA data going back to Fiscal 1976 that there have been three months of imports over $10 billion in any fiscal year.

The trade surplus dropping to just $483 million makes it the smallest trade surplus since a monthly deficit of $89 million in May 2016, and the first time in nine months the surplus has been less than $1 billion.

Washington Insider: Debt Ceiling Wars

Bloomberg is reporting this week that a new fight over the nation’s debt limit seems to be looming once again, although the real crunch likely will not happen until later. The group attempts to clarify what the political “ceiling” is and how it came about.

The very phrase “debt ceiling” sounds austere and restrictive, Bloomberg says, “as if intended to keep a lid on government spending, but then argues that it not had that effect” The federal debt limit was created in 1917 to make it easier to finance World War I by grouping bonds into different categories. Before that, lawmakers approved each bond separately.

With World War II looming in 1939, Congress created the first aggregate debt limit, and it was routinely raised without incident until 1953. That year, approval was held up in the Senate in an attempt to restrain President Dwight Eisenhower, a Republican, who wanted to build the national highway system.

In 2011, Bloomberg says, “just getting close to the debt-ceiling deadline rattled the financial markets and consumers, who feared that home mortgage and credit card interest rates would soar and that government payments, like Social Security checks, might be delayed. And S&P even downgraded its rating on sovereign U.S. debt. Congress used these pressures to extract spending cuts from President Obama, slicing domestic and defense spending by more than $2 trillion over a decade in the Budget Control Act of 2011.”

However, after Obama’s 2012 re-election, the President said he would never again give Republicans anything in return for a debt-limit hike. With no re-election to hold over Obama, Republican leaders repeatedly agreed to his debt demands lest they face the ire of the public over another financial crisis. This infuriated Tea Party voters and other small-government advocates. Unable to control his angry caucus, House Speaker Boehner resigned in October 2015.

Since then, the ceiling has morphed into an explosive political tool with the potential to roil financial markets. More recently, Congressional Republicans repeatedly sought to use it in their fight for budget cuts. Now they may need to decide whether they should raise the ceiling to allow fellow Republican President Donald Trump to fulfill promises he made for tax cuts and spending on the military and infrastructure, Bloomberg says.

Recently – in May – Treasury Secretary Steven Mnuchin urged members of Congress to increase the debt ceiling before they leave for their August recess, since tax receipts were coming slower than expected. In fact, the U.S. had already hit its current debt limit but House speaker John Boehner had hammered together a bipartisan budget agreement that suspended the limit until March 16, 2017, a date well past the 2016 election, with a new limit set at whatever the debt was that day, which ended up being $19.8 trillion.

The Treasury Department can keep paying the nation’s bills for a while, Bloomberg says, first by shifting funds around and then by “extraordinary measures,” like deferring payments to federal retirement accounts. But a failure to raise the debt ceiling could eventually result in a first-ever default on some of the government’s obligations.

While Senate Majority Leader Mitch McConnell, R-Ky., said Congress will raise the limit, he hasn’t suggested when this might happen and Bloomberg thinks there could be strong tension among cabinet members over how to respond. For example, Mnuchin has warned against playing politics with the country’s debt and wants to see a “clean” extension of the debt ceiling, without partisan riders. At the same time, Office of Management and Budget director Mick Mulvaney, who voted against debt ceiling increases while he served in Congress, says he’d like to see spending and debt reforms attached to a bill raising the limit.

Bloomberg also concludes that “at least one thing is clear about the debt ceiling: It hasn’t restrained the federal debt. That’s in the hands of Congress when it sets levels of taxation and spending, then borrows money when it runs a deficit. Raising the debt ceiling simply lets the government pay for things it has already decided to buy.” As a result, some budget experts and commentators want to abolish it, arguing that the congressional battles cost taxpayers money by increasing economic uncertainty, among other problems. Debt-limit supporters say opponents overstate the potential harm and that using it to bargain for spending cuts serves the public interest at a time of historically high debt levels.

So, we will see. Like much of the toxic politics of the current moment, this fight is unlikely to effectively short-circuit government spending which seems destined to continue to climb. However, it may also provide yet another area of bitter uncertainty amid battles over taxes, health care and other issues. It certainly is an area producers should watch closely as the debate emerges, 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 US Ag Policy, US Farm Bill and DTN Ag News sections on their News Homepage.

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