Washington Insider -- Monday

The Endless Budget Fight Once Again

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

FY 2019 US Ag Export Values Off To Slowest Start Since FY 2010.

U.S. ag exports totaled $11.277 billion in December against imports of $10.680 billion for a trade surplus of just $597 million.

That puts exports for the opening quarter of Fiscal Year (FY) 2019 at $35.648 billion, well below the opening quarter of FY 2018 when exports totaled $39.319 billion and is the smallest opening quarter of an FY since FY 2010 when exports totaled $30.163 billion.

Imports, meanwhile, totaled $31.899 billion for the first three months of FY 2019 compared with $30.692 billion in the same period during FY 2018. That puts the cumulative ag trade surplus at $3.749 billion, down from $8.637 billion the first quarter of FY 2018.

The troubling aspect of the data is that going back to FY 2013, the strongest months for U.S. ag export values are in the first three months of the FY.

Imports, meanwhile, typically do not register their highest values until the March-May period. Imports have opened FY 2019 like they did in FY 2018 – at $10 billion or more each month and they have been at or above that mark 14 of the last 15 months.

This means that more downbeat trade data is likely to come for U.S. agriculture in the months ahead.

Pingree offers bill to address ERS/NIFA move, ERS alignment

Rep. Chellie Pingree, D-Maine, has introduced a bill to stop USDA from moving the Economic Research Service (ERS) and National Institute for Food and Agriculture (NIFA) outside the national Capital region, attempting to halt USDA's plan to relocate the agencies outside the region.

The bill also directs USDA to keep ERS under the current research, education and economics mission area and not shift it under the Office of the Chief Economist. This is the latest effort in Congress to prevent USDA's plan from taking effect.

The Fiscal Year (FY) 2019 appropriations package also related congressional intent that they were not in favor of the proposed action by USDA.

Washington Insider: The Endless Budget Fight Once Again

The Hill and others are reporting this week that funding caps and the border wall proposal are providing the background for another tough defense budget fight — and lawmakers are once again “buckling up” for what they expect will be rocky negotiations for the fiscal 2020 defense budget.

In an attempt to skirt budget caps, President Trump is expected to propose more than doubling the amount of money in a war fund that is not subject to funding limits.

But that maneuver is viewed as a non-starter for Democrats and even some Republicans who say it will complicate talks from day one.

“I’m very worried,” House Armed Services Committee Chairman Adam Smith, D-Wash., said about this year’s budget negotiations. “How do they find their way back to a reasonable point in the discussion?”

Also looming over the defense budget is President Trump’s decision to declare a national emergency and dip into Pentagon coffers to build his proposed border wall. The Department of Defense has said it will request funding to replace the money being used for the wall but Democrats have made clear they consider that a roundabout way to get Congress to approve wall funding.

The president is slated to release his fiscal 2020 budget request this week. Presidential budgets are often dismissed on Capitol Hill since lawmakers are responsible for deciding how much money to spend and on what.

But the president’s budget requests establish an important marker for his policy priorities heading into budget negotiations. He is expected to request $750 billion in defense spending.

Of that amount, $174 billion is expected to be categorized under a war fund known as the Overseas Contingency Operations account, which was designed for temporary expenses associated with U.S. wars such as the ones in Iraq and Afghanistan.

A $174 billion request would be a $105 billion increase over the current fiscal year’s funding for that account. It’s also the exact amount of money the administration needs in excess of the budget caps to reach its desired $750 billion total.

The Budget Control Act caps fiscal 2020 defense spending at $576 billion, but the Overseas Contingency Operations (OCO) account is not subject to those spending limits.

Over the years, OCO has increasingly been used to fund programs previously included in the main defense budget, leading to criticism that it essentially operates as a slush fund. Trump’s proposal for $174 billion in OCO spending, however, would far exceed what’s been done before.

The Trump administration has acknowledged it plans to use OCO to avoid reaching a budget deal that would similarly increase nondefense spending.

Rep. Mac Thornberry, R-Texas, ranking member of the House Armed Services Committee, argued that the OCO request won’t affect congressional negotiations since few, if any, are taking the proposal seriously.

But discussions could be bogged down by trying to sort through what portions of the OCO request are war funding and what should go in the main Pentagon budget, said Todd Harrison, a defense budget expert at the Center for Strategic and International Studies.

And, a bipartisan, bicameral budget deal will have to be reached, one that raises caps on both defense and nondefense, Harrison said.

He said he foresees a deal coming in December or January, months after the fiscal year starts on Oct. 1, meaning there will again need to be stopgap measures to keep the government open.

Senate Armed Services Committee Chairman James Inhofe R-Okla., has signaled a willingness to expand the OCO budget if it means being able to get to $750 billion overall.

“I think you’re going to have an exaggerated figure there in order to get up to what we have to have to defend America,” Inhofe told reporters last month. His Democratic counterpart, though, is worried about the course of this year’s negotiations.

Meanwhile, Congress is grappling with Trump’s declaration of a national emergency to secure border wall funding. As part of the declaration, the President plans to tap $3.6 billion from military construction funding. He took separate executive action to use $2.5 billion from the Pentagon’s counter-drug funds.

The Pentagon has not said which projects that money will come from but officials have sought to assure lawmakers that they will request funding for fiscal 2020 to “replenish” the military construction account.

That assurance, though, has only angered Democrats.

“I'm not sure what kind of chumps you think my colleagues and I are,” Rep. Debbie Wasserman Schultz, D-Fla., chairwoman of the House Appropriations subcommittee in charge of military construction, told Pentagon officials at a recent hearing on the issue.

“You are taking money from vital projects that the military previously said were essential and spending that money on a wall and then asking for the money to be backfilled later in the next fiscal year when we already had that debate and the proposal was rejected,” she added.

Each of these fights is bitter and controversial, and tend to affect many other issues. These are concerns producers should watch closely as they intensify, 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 U.S. Ag Policy, U.S. Farm Bill and DTN Ag News sections on their News Homepage.

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