Washington Insider --Monday

New Debt Ceiling Showdown Lurking

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

USDA's Perdue Commits To Rolling Out Dairy Program ASAP

USDA is putting a lot of attention on getting the new dairy program in the 2018 Farm Bill ready for producers to use, with a goal of getting the tool in their hands and dollars flowing to eligible producers yet this spring.

The bill replaced the Margin Protection Program (MPP) for dairy in the 2014 Farm Bill with what is now known as the Dairy Margin Coverage (DMC) program. The new DMC will allow many small- and medium-size milk operations to buy higher levels of insurance protection at significantly lower premiums.

Getting the program rolling as quickly as possible was pledged by USDA Secretary Sonny Perdue in an appearance before the Senate Ag Committee, echoing commitments he made in a similar session Wednesday before the House Ag Committee.

By the end of April, Perdue said, USDA is aiming to issue premium refunds to dairy farmers for what they paid in under MPP. Those who participated in MPP for 2014 through 2017 are being given two options under the new farm bill: Get 50% of their insurance premiums back in direct cash or receive a 75% refund to use as a credit toward purchasing coverage under DMC. "We should get that rolling by the end of April," Perdue said.

For signup, Perdue said the agency is planning on June 17 for DMC, with payments hopefully beginning in early July. DMC payments are triggered when the difference between the price of milk and feed drop below thresholds that producers choose to insure.

Getting a payment calculator out for DMC is also a priority, Perdue said when asked by Senate Ag Committee Ranking Member Debbie Stabenow, D-Mich. "We are expecting to have that calculator out probably the middle of April, as quickly as possible – hopefully, before then," he explained. "We're going to allow those farmers with the retroactive insurance and MPP to participate beginning in the middle of March – March 18th."

USTR Lighthizer Says USMCA Approval Critical For Overall Trade Agenda

While the timeline for approval of the U.S.-Mexico-Canada (USMCA) agreement is still uncertain, the top U.S. trade official this week told US lawmakers that failure to approve it will have potentially far-reaching impacts.

"If USMCA does not pass," U.S. Trade Representative Robert Lighthizer told the House Ways & Means Committee this week, "it would be a catastrophe across the country. It would be very bad on every level, way beyond economics." That was a point that Lighthizer underscored to several lawmakers from several states who focused their questions on the trade deal with the U.S.' two closest neighbors.

But Lighthizer as the hours-long hearing wound down, expanded the impact of failing to approve USMCA. "There is no trade program in the United States that we don't pass USMCA, there just isn't one," Lighthizer warned.

Failure to approve USMCA would say that "we don't have a consensus and that we don't want to stand up for our workers and our farmers and our ranchers. I think there's no less than that at stake," Lighthizer stated. "We have an agreement. It's clearly better than its predecessor, there is no question." But, if it does not pass, he said in a rather stark observation, "you have no credibility at all – with China and you will have no credibility on any deals with your other trading partners."

Conversations with more than one lawmaker take place every day on trade, Lighthizer stated, and they always have ideas and thoughts. "I always in the back of my head think, if we don't pass USMCA, just don't bother. Just sit down and just say we'll just wait a few years before we say anything," he lamented.

Washington Insider: New Debt Ceiling Showdown Lurking

The Hill is reporting this week that an extension of the nation’s debt limit ran out on Saturday, starting the clock for a potentially painful negotiation between the Democratic House and President Trump on raising the nation’s borrowing limit.

So, yet another possible spending fight appears on the horizon. The government has until sometime after mid-summer to raise the legal cap on how much the federal government can owe creditors, The Hill says.

It notes that the Treasury Department on Friday suspended the sale of certain bonds and began a series of accounting maneuvers, known as “extraordinary measures” that will keep the U.S. government’s nearly $22-trillion debt beneath the legal limit.

Those methods are expected to give lawmakers until August or September to cut a deal before the U.S. approaches a debt limit.

The full faith and credit of the U.S. underpins the global economy and a missed debt payment or default could unleash unprecedented chaos, The Hill and most economists, believe. Battles over the debt limit in 2011 and 2013 led to downgrades of the country’s credit rating and spurred fears of a financial meltdown.

The U.S. “comes shockingly close on a yearly basis to defaulting on its obligations,” said Shai Akabas, director of economic policy at the Bipartisan Policy Center. “But we keep choosing to roll the dice.”

Republicans are also looking to bolster their debt-cutting credentials after two years of administration spending hikes. GOP fiscal hawks in the House and Senate have introduced resolutions that would declare the debt a national security threat. Such a measure would likely clear the Republican-controlled Senate but could fail to make it out of the Democratic House.

Treasury Secretary Steven Mnuchin wrote in a Feb. 21 letter to congressional leaders that “honoring the full faith and credit of the United States is a critical commitment,” urging them to raise the debt limit.

And president Trump suggested eliminating the debt limit entirely in 2017, though Republicans showed little interest in following through.

The deadline to raise the debt ceiling is also likely to occur close to an Oct. 1 deadline to prevent the imposition of automatic spending caps under the Budget Control Act.

That dynamic has generated some bipartisan interest in reaching a budget and spending deal that would lift the debt ceiling and fund the government beyond the 2020 election.

A senior House Democratic aide told The Hill that Speaker Nancy Pelosi, D-Calif., would prefer to raise the debt ceiling through a broader bipartisan budget deal. A new House rule would automatically send a debt limit extension to the Senate if a budget passes the lower chamber, expediting the process.

Both parties also have their own incentives to reach a deal to avoid mandatory spending caps: Democrats are eager to boost funding on social programs and Republicans want to avoid cuts to defense spending.

Even so, tying the debt limit to spending talks risks entangling the nation’s credit in difficult negotiations over sticky partisan issues. A showdown over border wall funding led to the longest government shutdown in modern history, leaving more than 800,000 federal workers without pay for 35 days.

“I think there are a lot of people in both parties who want to get past the Budget Control Act, get a debt limit that goes into 2021 and if we could get a two-year deal on spending, that would be a nice package,” said Rep. John Yarmuth, D-Ky., chairman of the House Budget Committee.

Party leaders have been mum on the debt ceiling so far, but appear eager to avoid any fiscal crises ahead of the 2020 election that could impede congressional reelection bids or the battle for the White House.

While Republicans had previously demanded spending cuts in exchange for raising the debt limit under former President Obama, the Trump administration and GOP leaders have previously supported increasing the ceiling with no strings attached under President Trump.

House Minority Leader Kevin McCarthy, R-Calif., said Thursday that the debt limit “should always be voted on by itself” while Congress mulls how to “change the direction of spending of America.”

Yarmuth said he’s confident that Senate Majority Leader Mitch McConnell, R-Ky., would back a debt limit increase and called his fellow Kentuckian “a willing partner.”

“I've known Mitch for a long time,” Yarmuth said. “His primary goal would be to get past the election and avoid any shutdowns or any crises where they're going to get blamed for it.”

“America's not going to default. And we'll get the job done in conjunction with the secretary of the Treasury,” McConnell said in August 2017, amid a previous scramble to lift the debt ceiling.

After the recent long government shutdown, few politicians appear willing to risk another interruption of government services. Still, the debt ceiling is always a ready, if badly misunderstood, political target so the ceiling debate is yet another fight producers should watch closely as it intensifies, 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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