Washington Insider - Tuesday

More Defense Spending Worries

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

Senate Ag Committee Adds Food Marketing Institute Official to Staff

Rob Rosado, Food Marketing Institute’s (FMI) government relations director, is moving to the Senate Agriculture Committee to work on nutrition, specialty crops and organic issues. "I'm pleased to announce another great addition to my Committee staff," Senate Agriculture Committee Chairman Pat Roberts, R-Kan., said. "Rob Rosado’s experience and perspective on nutrition issues will be key in the upcoming Farm Bill reauthorization."

As FMI’s director of government relations for seven years, Rosado handled food safety, menu labeling, nutrition, the Farm Bill and agriculture policy for the trade group that represents food retailers. FMI said it will be "moving expeditiously to fill the role in 2018" and plans to work with Rosado in his new role on nutrition issues on the powerful Senate Agriculture Committee.

Still Lots of Items on Congress' To-Do List Ahead

While a government shutdown was averted, the Washington agenda is still packed when lawmakers return in January. The House approved an $81 billion disaster aid package on a relatively bipartisan vote. But the Senate hit the pause button, not taking up the plan and putting that onto their 2018 to-do list. Tax extenders were acted on by neither chamber. Senate Finance Committee Chairman Orrin Hatch, R-Utah, generated a bill, but those on the House side indicated they had only heard about it and that no discussions had started.

Plus, House Ways & Means Committee Chairman Kevin Brady, R-Texas, again seemed to dampen expectations, reiterating his view that tax extenders are "horrible" way to do tax reform. Scores of nominations for various government posts were continued into the new year, while a batch of some were approved – nearly 30. However, key nominees for trade posts are among those that will be continued into 2018 as will the nomination of Bill Northey to serve as a key USDA undersecretary.

Washington Insider: More Defense Spending Worries

There are new concerns in the administration about defense spending, but defense hawks are brushing them aside, The Hill says. It notes that concerns that the freshly passed tax cuts could squeeze defense spending and thwart the Trump administration’s efforts to bulk up the military are overblown.

However, the official scorekeeper has estimated the tax cuts passed by Congress this week could add about $1.5 trillion to the deficit over the next decade. Budget analysts are telling The Hill that the added debt could create new constraints on government spending, including for defense.

At the same time, supporters of increased military spending, like other Republicans who supported the tax bill, insist that the deficit predictions are off base.

“The whole idea is that, as we’ve learned every time we’ve gone through one of these, you do have more funding that comes in because the economy booms,” Sen. James Inhofe, R-Okla., a senior member of the Senate Armed Services Committee, said.

Republicans achieved their biggest legislative victory of the year last week when they passed a bill that permanently lowers the corporate tax rate from 35% to 21% and temporarily lowers tax rates for individuals and families.

Meanwhile, defense hawks are pushing a $700 billion defense budget for fiscal 2018 to start a buildup of the military. Defense Secretary James Mattis has asked for 3% to 5% budget growth each year to pay for a sustained increase of the armed forces that includes thousands of additional troops, dozens of additional ships and a hundred more combat aircraft.

Democrats have slammed Republicans for cutting taxes at the very time they are looking for significant increases in defense spending.

“In an act of absolute pure insanity, they want to reduce revenue by another $1.5 trillion plus. If you add in the interest the debt accrues, I guess it’s over $2 trillion,” Rep. Adam Smith., D., Wash., ranking member of the House Armed Services Committee, told reporters at a recent breakfast roundtable.

“You got all this clamoring that we don’t have enough money for defense because we’re not funding readiness, we’re not ready for North Korea, we’re not ready for Russia, we’re not ready for this, that and the other thing, and then you want to reduce the amount of money [coming in]? It just doesn’t make any sense.”

Bolstering Democrats was a letter from three former Defense secretaries arguing the tax bill could present a national security threat by exacerbating the budget uncertainty that’s plagued the Pentagon in recent years.

“Our intent is not to criticize tax relief itself, but to raise the concern that tax relief without fiscal discipline will inevitably add to the national debt,” Obama administration Defense secretaries Leon Panetta, Ash Carter and Chuck Hagel wrote in a letter to congressional leaders last month. “That increase in the debt will, in the absence of a comprehensive budget that addresses both entitlements and revenues, force even deeper reductions in our national security capabilities.”

Some conservative defense experts likewise raised concerns about the tax bill.

“I don’t see how defense hawks can in good conscience vote for a tax bill that will add at least $1 trillion to our debt. That will undermine our fiscal health and crowd out defense spending. This is a bill that will make China great again,” Max Boot, a senior fellow at the Council on Foreign Relations, tweeted Monday.

Congress’s most prominent defense hawks, though, supported the tax bill.

House Armed Services Committee Chairman Mac Thornberry, R., Texas on Thursday blamed tax reform for “sucking all of the oxygen out of the room” and preventing a budget deal that would raise defense spending by Friday’s deadline to fund the government. But he said he doesn’t think the deficit projections will affect the future debate on funding the military.

Thornberry’s Senate counterpart, Senate Armed Services Committee Chairman John McCain, R-Ariz., has previously said he doesn’t see how it relates to defense spending.

“We have a military where we’re losing men and women’s lives because we haven’t funded their training and equipment,” McCain told reporters earlier this year. “That has nothing to do with tax cuts. It has everything to do with the lives with the men and women in uniform — that we are responsible for their needless deaths.”

Sen. Lindsey Graham R-S.C., an Armed Services Committee member and close ally of McCain’s, said after the tax bill’s passage that the real thing squeezing the defense budget is mandatory spending on domestic programs.

“Spending is about entitlements. What’s going to destroy the Defense Department is entitlements,” he said.

“The No. 1 obligation is to defend the country, and when it comes to the discretionary budget, the Defense Department goes first, but there won’t be money left through entitlements.”

So, we’ll see. It is clear that we will face spending and budget fights for as far as the eye can see, especially if the majority party can convince its supporters that the tax bill will avoid boosting the deficit and that defense spending increases are fundamentally important. This is a key fight produces should watch closely as it proceeds, Washington Insider believes.

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