Washington Insider -- Monday

The Perpetual Budget Fight

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

State, Local Officials Urge Inclusive Approach to WOTUS Rewrite

Any rewrite of the Environmental Protection Agency's (EPA) Waters of the U.S. (WOTUS) regulation – which clarifies the waters and wetlands that fall under federal protection – should reflect differences in regional climate, geology and hydrology, state and local officials urged in comments to EPA on the matter.

EPA is reviewing the Obama-era WOTUS rule under an executive order issued by President Donald Trump. A rewrite of the regulation should include an analysis of impacts on local governments, and clear definitions that outline Clean Water Act (CWA) jurisdiction, state and local officials said, aspects that were missing in the original WOTUS rule.

EPA sought feedback on how state, local and federal governments all three levels of government can display cooperation in rewriting the regulation based on the direction provided in the February executive order. States' views mostly focused on how the rulemaking should proceed, but did not get overly specific as they do not know the direction EPA plans to take, according to Julia Anastasio, executive director of the Association of Clean Water Administrators – which represents state water officials.

“If you give states the opportunity to understand enough of the direction that a proposed rule may be heading then we think we can really assist and avoid some of the pitfalls from the last go around,” Anastasio told Bloomberg BNA June 21, adding that states do not want “a parent-child relationship” with EPA, but rather one of equals.

Arizona, Kentucky and South Dakota are among 31 states challenging the WOTUS rule on grounds the federal government was taking over regulation of waters that fell under state authority. Many of those states offered their comments on how the Trump administration should approach its rewrite of the regulation.

New York is among the seven states involved in defending WOTUS court. To provide a level playing field among states and a strong and consistent regulatory floor, New York wants the agencies to develop a sound national rule and inventory of federal protected waters, Basil Seggos, New York's commissioner of environmental conservation, told EPA.

The process of defining the terms that late Justice Scalia used in his opinion, such as “relatively permanent” or “continuous surface connection,” will present different challenges in every region, acknowledged the Environmental Council of the States.

Resignation of CFTC's Bowen Could Spur Action on Nominees

Quicker moves to confirm nominees for the Commodity Futures Trading Commission (CFTC) could be spurred by the impending departure of Commissioner Sharon Bowen.

The departure put pressure on the White House and lawmakers to move more quickly on Democratic successors, derivatives lawyers said. Bowen announced June 20 she would depart CFTC in the “next few months” and maybe sooner if a replacement is confirmed, but nothing prevents her from leaving earlier. That scenario would leave just one member, acting Chairman J. Christopher Giancarlo.

Bowen said one reason she resigned was to “inspire” lawmakers to fill out the agency. An early departure could do just that. "Were Commissioner Bowen to leave before a replacement has been confirmed, I'm not sure that the commission actually would be able to function,” Paul Architzel, co-head of the futures and derivatives group at Wilmer Cutler Pickering Hale and Dorr LLP, Washington, told Bloomberg BNA.

CFTC has significant authority to react to market emergencies such as a flash crash or the failure of a major market participant, Architzel said. “It would be a substantial risk” on the part of the White House and lawmakers to leave the situation in doubt, he added.

CFTC, by statute, could operate with one member or just Republicans, but that would be politically problematic, observed Nihal Patel, a derivatives attorney at Cadwalader, Wickersham & Taft LLP. He noted that Republicans have complained about the structure of the Consumer Financial Protection Bureau (CFPB), which is run by one person — a director — instead of a bipartisan commission.

“From the Senate's perspective, it wouldn't be consistent for them to say, we're OK with [the CFTC] acting with only Republican appointees, given that in another context, it said that a bipartisan approach and multi-member commission has lots of benefits,” Patel said.

The White House has announced two candidates for open Republican slots at the commission who would join Giancarlo — former trader Brian Quintenz and consultant Dawn Stump. While no Democrat has been named yet, Senate Agriculture Committee staffer Russ Behnam is rumored to be a leading candidate for the seat that was open before Bowen's announcement.

Washington Insider: The Perpetual Budget Fight

In addition to the health-care battle and the tax-reform effort, among other things, the Congressional majority is hard at work on how to package the 12 annual appropriation bills needed to keep the government open in the fall. Bloomberg is reporting this week that the package is nearly complete, but that the committee failed to reach agreement last week on some key, outstanding details.

Apparently, the deepest disagreements concern the “top-line level for defense spending next year, as well as resistance by the ag committee over cuts to the food-stamp programs.” These may well prevent the House Budget Committee from its planned markup next Wednesday—at least for now, Bloomberg says,

The report also notes that the conference has agreed to back $511 billion as the top-line for non-defense spending, lower than the $515 billion budget cap for fiscal 2018 and a cut from $518.5 billion in the current fiscal year. "That’s what the speaker announced today. So we’re going to proceed," State-Foreign Operations subcommittee Chairman Hal Rogers, R-Ky., told reporters.

Senate Appropriations Labor-HHS-Education Subcommittee Chairman Tom Cole, R-Okla., who also sits on the Budget Committee, said the main problem is resistance from the Armed Services Committee to the $621.5 billion top-line the Budget Committee wants to set. Armed Services Chairman Mac Thornberry intends to use $640 billion as the top-line for regular defense spending, bumping that up to $705 billion when uncapped war funds are included.

Cole expressed hope the disagreement can be resolved. "It’s not a huge amount of money," in the context of the budget, he said—a comment that staggers the imagination of most mortals. Committee Vice Chairman Todd Rokita, R-Ind., said the resolution is "90%" complete and he believes a markup will happen next week. "To get to tax reform we are going to have to compromise," he said, criticizing the House Armed Services Committee. "The sweet spot for the conference is not what HASC is doing."

In an important sense, agriculture also is squarely in the midst of these fights. For example, reconciliation instructions to put reductions to entitlement programs such as welfare and food stamps on a fast track remain a sticking point. House Freedom Caucus Chairman Mark Meadows, R-N.C., said today he is still pushing for more than the $150 billion in cuts included in the draft budget resolution.

This is a far greater amount than the cuts being considered by House Ag Committee Chair Mike Conaway, R-Texas. He told reporters that he worries the level of cuts in the resolution would make it harder to complete a 2018 Farm Bill, which depends on a coalition of farm interests and urban lawmakers worried about food stamp funding. He said he is open to making some cuts but wants to negotiate the level.

House Transportation and Housing and Urban Development Subcommittee Chairman Mario Diaz-Balart, R-Fla., said the conference also has not decided whether to package appropriations bills as a giant July omnibus or to consider a series of minibuses. He said that agreement on the top-line must come first.

Bloomberg also notes that while House Republicans agreed to cut non-defense agencies to $511 billion next year, many say Democrats will still have an opportunity to boost that level before the fiscal 2018 spending cycle is completed. Republicans want to raise defense spending above the $549 billion cap that is set in law and they will need at least eight members of the Senate Democratic caucus to do that under that chamber’s rules.

"Because to break those caps, it’s going to require a bipartisan agreement. And I guarantee you, you won’t get the agreement on $511 billion on non-defense," House Military Construction-Veterans Affairs subcommittee Chairman Charlie Dent, R-Pa., said.

Democrats say that while a $4 billion cut to the non-defense cap is much smaller than the $54 billion cut that President Trump proposed, the pain will actually be deeper than the level proposed by House Republicans. Current spending is at $518.5 billion, so the cut would be $7.5 billion from current levels and Republicans have already decided to shift $4 billion from other programs to veterans. The expense of social programs, especially related to housing, rises naturally with inflation and with population increases.

What all this means is that, as is well known, the differences between the two parties are greater than ever and that the current deep seated tensions may well mean sharp, unexpected changes to key programs. Agriculture has long relied on bipartisan support for expensive safety net programs as well as those for conservation and nutrition. Increasingly, it is likely that the debate to reauthorize these programs will be both long and bitter, Washington Insider believes.

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