Washington Insider -- Tuesday

More on the Remarkable Budget Fight

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

USDA's Perdue Headed to China to Mark Return of US Beef

The return of U.S. beef to the Chinese market for the first time since 2003 will be marked by a visit to China June 30 and July 1 by USDA Secretary Sonny Perdue, USDA announced.

Perdue will be accompanied by U.S. Ambassador to China Terry Branstad to formally mark the return of U.S. beef to the Chinese market, with the two officials ceremoniously scheduled to cut prime rib that originated from Nebraska and was shipped to China by Greater Omaha Packing Company.

Perdue will meet with Chinese government officials to mark the return, USDA said. "I will be proud to be on hand for the official reintroduction of U.S. beef to China," Perdue said. "This is tremendous news for the American beef industry, the agriculture community, and the American economy in general. We will once again have access to the enormous Chinese market, with a strong and growing middle class, which had been closed to our ranchers for a long, long time. There's no doubt in my mind that when the Chinese people taste our high-quality U.S. beef, they'll want more of it."

But touting U.S. beef is not his only purpose for the trip as Perdue June 30 will discuss additional market access goals with Chinese Minister of Agriculture Han Changfu, USDA said, and will later that day discuss expanding trade with China in a meeting with Chinese Vice Premier Wang Yang. On July 1, Perdue will tour a grocery store and take part in a cooking demonstration in Shanghai.

USDA Maintains 2017 Food Price Forecasts

Consumers are expected to see supermarket prices in 2017 steady to 1% higher than 2016 when they fell for the first time since 1967, according to USDA's Food Price Outlook.

Even as poultry, fish and seafood and dairy prices are forecast to decline in 2017 compared to 2016, USDA said they are holding their food price forecast for food at from home (grocery store) prices steady. USDA also left their forecast for food away from home (restaurant) prices at a rise of 2% to 3% compared to 2016. The standard "cautions" on weather and currencies potentially impacting the food price situation are included by USDA.

USDA did further reduce its outlook for egg prices, forecasting a fall of 5% to 6% after they dropped 21.1% in 2016. USDA also expects dairy product prices will rise 0.5% to 1.5%, a trim from their prior outlook. Plus, processed fruits and vegetable prices are seen steady (down 0.5% to up 0.5%) compared to 2016.

Overall, USDA expects food prices will increase 1% to 2% in 2017, a below-average rise as the 20-year average for overall food inflation at the consumer level is 2.5%.

But food prices at the grocery store remain under year-ago levels, with May 2017 prices 0.2% below May 2016, USDA noted, while restaurant prices are up 2.3% and overall food prices are up 0.9%.

This is still not contributing a great deal to the overall inflation situation, especially with energy prices downtrending on the recent fall in oil prices. And for consumers, grocery store prices still are providing them with more spending power, with the year-to-date grocery store prices down 0.3% compared to this point in 2016. Volatility in food prices, however, is not uncommon and why the core rate of inflation remains a closer watched item than the "headline" figure.

Washington Insider: More on the Remarkable Budget Fight

The Hill is reporting this week on a fairly widespread scenario—as cabinet members take heavy fire over the administration’s budget request in hearing after hearing. This is not so unusual, observers say, but what is somewhat different is that much of the criticism is coming from Republicans.

Examples abound, The Hill says. Rep. Hal Rogers, R-Ky., a former chairman of the Appropriations panel, told Interior Secretary Ryan Zinke at a June 8 hearing that he was “flabbergasted” by his budget proposal to end a workforce redevelopment pilot program designed to help coal workers. “Not all of these decisions we will agree on, but this is what a balanced budget looks like,” Zinke replied, defending the 13% cut to the Interior Department.

Sen. Lindsey Graham, R-S.C., listed a series of strategic challenges that would be exacerbated by cuts to the State Department totaling nearly 30 percent. He called the budget request “in many ways radical and reckless when it comes to soft power.”

Secretary Tillerson replied, somewhat awkwardly, that State’s funding was not all that important to achieving its goals. And, he said that State was “looking for nongovernment actors to make up for programs that would be cut or eliminated by the proposed budget.”

The Hill observes that budget fights are frequently tense, and that officials from administrations in both parties expect to take partisan lumps as part of the process. It added that it is not even uncommon for “members of the president’s own party to question cuts that might affect their districts.”

This time, however, “it’s the size of the cuts in Trump’s budget that are unusual, along with the volume of complaints from Republicans.”

To pay for a proposed $54 billion in defense increases, the administration proposed cutting the same amount from nondefense discretionary programs. The budget also proposed additional cuts from mandatory spending programs such as the nutrition programs, Temporary Assistance for Needy Families and disability insurance.

Veterans Affairs Secretary David Shulkin actually denounced a proposed $3 billion cut to Individual Unemployability, a cut that would pull additional disability benefits from roughly 200,000 veterans.

“We have budget numbers and targets that we have to hit, but we shouldn’t be doing things that are going to be hurting veterans that can’t afford to lose these benefits,” Shulkin told Sen. Dean Heller, R-Nev., at a June hearing.

This time, “most of the cuts being defended by Trump’s Cabinet have zero chance of making it through Congress,” the Hill says. “The president’s budget is, at the end of the day, a messaging document,” Office of Management and Budget Director Mick Mulvaney said to reporters last week. But they have little choice but to offer some kind of defense.

Housing and Urban Development Secretary Ben Carson told Rep. Mario Diaz-Balart, R-Fla., that community development funds cut from his agency’s budget could be made up in an infrastructure bill that the administration is pursuing. Yet there have been no indications that portions of the block grant program would be included under the Transportation Department or in an infrastructure bill, The Hill said.

The Hill also reported that Carson made the mistake of praising the U.S. Interagency Council on Homelessness as “effective,” although the program was eliminated in the budget proposal. And, Commerce Secretary Wilbur Ross described the Economic Development Administration, also eliminated in the Trump budget, as an effective program before falling back on the argument that “tough decisions” led to it being extinguished.

The Congressional pressure has even led some Cabinet members to acknowledge reservations about the cuts. For example, EPA Administrator Scott Pruitt told the House Appropriations subcommittee hearing in June that the 30% cut proposed was not necessarily carried out the way he would have wanted.

In response, Rep. Ken Calvert, R-Calif., the subcommittee’s chairman, scolded him, saying, “This is perhaps not how you personally would craft the EPA’s budget, but it’s the budget you have to defend here today.”

Pruitt’s defense: “This is our approach presently, but we look forward to your input on how, maybe, this can be restored and/or addressed in a different way.”

How important the Cabinet’s budget anxiety will turn out to be is unclear, but administration budget proposals often face considerable criticism when they arrive on the Hill. While there is obvious Congressional discomfort at some of this administration’s management and budget decisions, there seems to be a clear Cabinet willingness to “suck it up” and argue for the cuts, even when the defense offered is quite shaky. Thus, it will be important to note the Congressional response to these presentations and the appropriations bills that come forward as the process continues, Washington Insider believes.

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