Washington Insider -- Monday

Ongoing Fight over USAID Spending

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

Reuters: Trump Call Prompted EPA to Move Ahead with Small Refiner Exemptions

President Donald Trump phoned EPA Administrator Andrew Wheeler last week and told him to go ahead and announce the small refiner exemptions (SREs) for the 2018 compliance year, according to a report from Reuters.

The news service said Trump told Wheeler he had “had enough” of the situation and gave Wheeler the “green light” to announce EPA was granting 31 SREs for the 2018 compliance year, siding with refiners.

This will keep the matter a focal point ahead, particularly for Trump as he seeks another term in the White House.

Chicago Fed Survey Says Farmland Values Declined

Farmland values in the Chicago Fed District fell one percent from year-ago levels during the second quarter of 2019, according to the latest update from the bank.

But the survey of 157 bankers in the district that covers northern areas of Illinois and Indiana, southern Wisconsin, the lower Peninsula of Michigan and the state of Iowa, did however, report values for “good” agricultural land held steady with the first quarter. The region experienced excessive rainfall, historic flooding and widespread planting delays this spring; not surprisingly, bankers indicated that 69 percent of their borrowers were at least modestly affected by extreme weather the first half of the year.

Nevertheless, the 83% of respondents expect ag land values to hold steady during the third quarter. However, the bank reported that there were “major” or “severe” repayment issues with 6.2% of the district’s ag loan portfolio, a level not seen since the second quarter of 1999.

Washington Insider: Ongoing Fight over USAID Spending

Far below the anxiety about risks of an economic slowdown and the coming election, this year’s skirmish over funding for US overseas aid is continuing this week.

The administration has never been much of a fan of aid spending and has frequently proposed cuts. On Friday, top appropriators from both parties warned the White House against attempting to claw back foreign aid saying any effort on that front could complicate spending talks aimed at preventing a government shutdown in the fall.

The trigger, The Hill says, is White House preparations for a formal request to Congress to rescind $4.3 billion funds already appropriated to 10 foreign aid accounts.

“At a time when threats from Iran are increasing, ISIS has not been vanquished, the Administration is putting significant pressure on the regime in Venezuela, and aiming to curtail the North Korea nuclear program, the rescission package is particularly concerning," Sen. Lindsey Graham, R-S.C. and Rep. Hal Rogers R-Ky, wrote in a letter to President Trump.

The request is coming from a heavy-duty group, The Hill says. Graham, a close Trump ally, chairs the Senate's appropriations subcommittee that covers the State Department and foreign aid and Rogers is the top Republican on the same subcommittee in the House.

"A move to rescind funding absent policy input from the Department of State and US Agency for International Development only undermines our national security interests and emboldens our adversaries,” they added. “We strongly urge you to reconsider this approach.”

Rep. Nita Lowey, D-N.Y., who leads the House Appropriations Committee, also warned of consequences for the move.

“The Trump administration’s continued efforts to illegally withhold funding that Congress has approved subverts critical norms in our democratic process," she told The Hill on Friday. "We are insisting that the administration spend the appropriated foreign assistance funds and are working with GAO to make sure the law is followed.”

The rescission request could end up freezing the funds through Sept. 30, the end of the fiscal year even if Congress chooses to reject the request like it did with a similar White House effort last year.

The GAO determines what funds can be frozen by request, and which ones must remain available while Congress considers the request.

The funds in question, which include unobligated money from fiscal years 2017-2019, amount to several billion dollars for international peacekeeping, monitoring illegal drugs, economic development, health and funding the United Nations, among other issues.

Congressional Democrats last week lashed out at the administration after hearing the White House had frozen those funds while waiting for the State Department to provide updates on how much money was left in each of the accounts. The White House Office of Management and Budget unfroze the funds Aug. 9 after receiving the update, according to a senior administration Official.

The White House said it would not request rescissions for programs that President Trump requested in his budget proposal for the current fiscal year.

While the White House has not announced whether it will submit the rescission request, Lowey said but she expects that if it goes forward it could affect the process of appropriating funds for the new fiscal year, which begins Oct. 1.

"It is obvious that every time Mick Mulvaney thumbs his nose at Congress, he erodes trust and makes the fiscal year 2020 appropriations process more difficult,” Lowey said, referring to Trump's acting White House chief of staff.

Congress and Trump agreed to higher spending levels for the 2020 fiscal year, but lawmakers still need to pass spending bills to keep the government open in the new fiscal year. Congressional appropriators are hoping to pass the two largest bills — defense and labor, health and human services, and education — alongside a stopgap measure for the rest of the government.

Further complicating the talks is the administration’s request for border wall funding, an issue that led to the longest government shutdown in US history this past year.

Senate Minority Leader Charles Schumer, D-N.Y., and Sen. Patrick Leahy of Vermont, the top Democrat on the Senate Appropriations Committee, called on Trump to withdraw the request and put the money toward preventing gun violence.

"We urge you to support spending funds you have requested for the border wall, on other pressing needs such as proven initiatives that will address the threats of gun violence and white supremacist extremism in America," the two senators wrote in a letter to Trump, referencing the recent mass shootings in Texas and Ohio.

"Specifically, we ask you to consider supporting counter-violent extremism programs, domestic terrorism investigations at the FBI, gun violence research at the Centers for Disease Control and support services in schools and communities, such as school counselors," they added.

Clearly, the concern over a possible economic slowdown is attracting a great deal of administration attention just now, along with issues regarding the ongoing tariff fight with China. Still, lower key issues, especially those regarding the budget and spending are important and have long-term implications — and should be watched closely by producers as they intensify, Washington Insider believes.

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