Policy Updates: White House Officials Reveal Some Infrastructure Proposals

Posted on 02/12/2018 5:03 AM

Trump budget will not balance budget, to seek $3 trillion in spending cuts

Transportation details of Trump budget will be closely read, but funding still remains lingering hurdle. President Trump plans to tout his infrastructure plan this morning at a White House event with state and local officials. The proposals call for $200 billion in federal money over the coming decade to encourage other levels of government and the private sector to raise their spending on infrastructure by more than $1 trillion to hit the administration’s goal of $1.5 trillion in new funding over 10 years. Last week's budget agreement notionally agreed to set aside $20 billion over fiscal 2018 and fiscal 2019 as a down payment on the administration's plan.

The infrastructure plan also wants to significantly reduce the time required to obtain environmental permits for such projects. The request will include proposed cuts designed to offset the spending laid out in the infrastructure proposal released separately from the budget request. A fourth area, rural broadband, currently receives financial support through programs at USDA and the Federal Communications Commission.

The proposal will have four major objectives: spur $1.5 trillion in new infrastructure spending, shorten the time needed to obtain permits to two years, spend more on rural infrastructure, and focus on the workforce.

The Trump plan is open to a new source of funding to cover the federal share — such as raising the 18.4 cents a gallon federal gas tax for the first time since 1993 — but Congress will not likely go along, especially in an election year plus recent hefty spending via the two-year budget agreements. Last month, the U.S. Chamber of Commerce called for a 25-cent-per-gallon increase, which it said would raise more than $375 billion over the coming decade.

Shuster comments. In a statement Sunday, Rep. Bill Shuster (R-Pa.), chair of the House Committee on Transportation and Infrastructure, said legislation “needs to be bipartisan, fiscally responsible and make real long-term investments in our nation.” Shuster wants a sustainable source of funding. At the recent GOP retreat in West Virginia, he floated the idea of raising the gas tax. It’s “the elephant in the room,” Shuster said. In a briefing over the weekend, senior White House aides stressed that Trump’s plan is intended to be an opening bid on legislation that will require bipartisan cooperation to pass.

House Democrats last week unveiled an alternative plan, dubbed “A Better Deal to Rebuild America,” that envisioned $1 trillion in direct federal spending — five times what Trump will propose.

The question is how are you going to pay for it?” said Sen. John Cornyn (R-Texas), after President Trump highlighted infrastructure spending last month in his State of the Union address. “You tell me how we can pay for it and I’ll tell you what we can do.”

Some details of Trump's infrastructure proposals:

  • Of the proposed $200 billion in federal spending over the coming decade, half of it ($100 billion) would be used to create an incentives program to reward states and localities that invest more in infrastructure projects. The money would be doled out on a competitive basis, with awards that amount to up to 20% of a project’s cost. The Department of Transportation, the Environmental Protection Agency and the Army Corps of Engineers would be the federal agencies that steer the money in the incentive program.

  • To qualify, states and localities would have to be willing to raise new revenue for their projects. Some examples cited by White House aides: increases in property taxes or sales taxes or an increase in tolls or other user fees.

  • $50 billion would be directed to rural infrastructure programs, distributed to governors through block grants.

  • $20 billion would be spent on “transformative” projects, such as plans to build tunnels for high-speed trains.

  • $20 billion to expand federal loan programs;

  • $10 billion in a capital financing fund for federal office buildings.

Infrastructure legislation would move through at least five committees in the Senate and at least six in the House, White House officials noted. In the House, the authorizing committees would include Transportation and Infrastructure, Education and the Workforce, Veterans' Affairs, Natural Resources, Energy and Commerce and Agriculture; thee main Senate committees involved would be Environment and Public Works and Commerce, Science and Transportation, with at least three others to play some role, the officials said.

President Donald Trump's fiscal 2019 budget proposal will be released at 10:30 am CT today and will take into account the newly enacted two-year budget deal but will also suggest how to do more with less, the White House's top budget official said Sunday. Office of Management Budget Director Mick Mulvaney outlined a two-pronged approach that will address the $320 billion agreement signed into law Friday and offer ways Congress should spend it.

The new two-year discretionary caps are being viewed as a ceiling, not a target, Mulvaney said, and the budget will propose $3 trillion in spending cuts over the 10-year period it will cover to move back toward a balanced budget, below the $3.6 trillion in proposed spending reductions the White House put forward in its fiscal 2018 budget last May.

No balanced budget ahead. Trump's budget will make proposals for spending cuts to tame the deficit, but the government will still be spending more than it is taking in through taxes over the next decade. The White House is expected to project the economy will grow at a stronger clip than many economists believe will occur. The faster the economy grows, the more tax revenue will increase, helping offset spending.

The budget will continue to push for Trump’s wall along the U.S.-Mexico border. The White House will ask Congress to provide more than $23 billion for border security and immigration enforcement. Of that figure, the administration is proposing that $18 billion be spent during this fiscal year and fiscal 2019 for wall construction, according to an OMB summary (link). Trump wants to spend $782 million to hire 2,750 more law enforcement officers and agents at Customs and Border Protection and Immigration and Customs Enforcement. The budget also proposes spending $2.7 billion to pay for 52,000 illegal immigrants to be held in federal custody at any one time.

Farm bill update.

  • Rep. Jim McGovern (D-Mass.) said the nation's farm bill is now being written behind closed doors, and that he will vote against it if it guts hunger and nutrition programs. "I want there to be a farm bill," he said. "And I want there to be a farm bill that addresses the needs all of us care about. But no farm bill is better than a lousy farm bill." McGovern, who sits on the House Agriculture Committee, on Sunday addressed a public forum hosted by Rural Commonwealth. "There is a bill out there that is supposedly being scored by the Congressional Budget Office, but nobody's seen it," McGovern said. He charged the bill is "right now being written in secret," bypassing the traditional subcommittee structure. It could emerge in March, at which point the full committee will probably have a week to conduct a "marathon markup" and introduce amendments. McGovern suggested that if the bill fails, it might be more fruitful to try again after the mid-term elections if Democrats regain the House.

  • House Agriculture Committee Chair Mike Conaway (R-Texas) wants a vote on the farm bill by the end of March, to leave enough time to work out differences with the Senate version. The 2014 Farm Bill expires at the end of September. But Conaway has warned that the House could be busy in March with debates over immigration policy and a fiscal 2018 spending bill that Congress needs to pass before March 23 and the Easter recess. As others have noted, Conaway said the main threat to farm programs is amendments pushed by lawmakers against major programs such as crop insurance.

  • There’s only so much money to go around in funding the farm bill and everyone wants the best safety net that producers can get,” Dr. Joe Outlaw said at a recent farm bill summit in Austin, Texas.

Other items of note:

  • Senate immigration reform debate begins late today. A group of Republican senators have proposed immigration legislation that would grant 1.8 million so-called Dreamers a path to citizenship in return for a $25 billion border wall trust fund and changes to the legal immigration system. The Senate is expected to formally begin an immigration debate this evening.

  • North Korea update. U.S. Vice President Mike Pence and South Korea’s Moon Jae-in agreed to pursue dialogue with North Korea during conversations at the Winter Olympics in Pyeongchang, the Washington Post reports. Direct talks with North Korea about its nuclear program would mark a shift in U.S. policy. Pence dubbed the new strategy “maximum pressure and engagement at the same time.”

  • The Congressional Budget Office said the budget deal would cost nearly $320 billion over a decade and would reduce mandatory spending by nearly $47 billion over 10 years even as it balloons discretionary spending. Link to CBO assessment. Link to CBO assessment of retroactively extending the lapsed biodiesel tax incentive, but only for 2017.

  • RFA's Dinneen: Cruz scapegoating the Renewable Fuels Standard. Bob Dinneen, president and CEO of the Renewable Fuels Association, commented in a Texas newspaper (link) about Sen. Ted Cruz's (R-Texas) hold on Bill Northey, President Donald Trump’s choice to be USDA’s undersecretary for farm production and conservation. Cruz objects not “because he thinks Bill Northey is not qualified for the position; he agrees Northey is a terrific person, but because he wants to use the leverage of holding up Northey to force changes to an energy program completely unrelated to USDA.” He wants to see changes to the Renewable Fuels Standard, or RFS. Dinneen wrote that, “Not only is the senator wrong to hold one of President Trump’s nominees hostage, he is wrong in his continued criticism of the RFS. Sen. Cruz believes the RFS disadvantages independent refiners by requiring them to purchase credits when they choose not to blend the amount of renewable fuels the law requires. Cruz points to the recent bankruptcy filing of a Pennsylvania refinery as evidence of the program’s failure. But that refinery is the oldest in the country; it suffers from antiquated technology; is captive to higher priced imported crude oil; and has made a series of poor business decisions leaving it vulnerable to the highly volatile credit market. It is certainly not a good poster child for RFS reform. It’s a poster child for gross mismanagement.” Dinneen noted that this week, more than 1,000 energy experts from across the globe will descend on San Antonio for the 23rd annual National Ethanol Conference. The conference will celebrate groundbreaking achievements and outline future challenges the renewable fuels industry will face.

  • Health insurance big issue in farm country. Nearly two thirds of commercial farmers say the cost of health insurance poses the biggest threat to their livelihoods, according to a new study. Link.

  • Mexican corn industry pushing big tariff on U.S. corn in NAFTA 2.0. While Mexico's trade officials have yet to comment, Mexican corn producers want a renegotiated NAFTA to slap a 45% tariff on U.S. exports of yellow corn to Mexico, according to Mexico newspaper Reforma. The movement in part is linked to a U.S. seasonal proposal regarding fruits and vegetables.

  • Bayer-Monsanto merger must consider digital farming. Bayer must ensure that a merger Monsanto doesn’t stymie competition in digital farming, European Union’s Competition Commissioner told a German newspaper over the weekend. Link.

  • FSIS extends comment period to May 2 on hog plant inspection proposal. USDA's Food Safety and Inspection Service (FSIS) extended the comment period by 30 days for the proposed plans to establish a new system for inspecting hog slaughter plants. The extension was made following requests from industry and consumer groups, USDA said.

  • China has signed its first long-term contract to import U.S. liquefied natural gas, the Wall Street Journal reported. Link.

  • "There is a clear path forward [on NAFTA] and we're working very hard together on that path," said Canada's Justin Trudeau, capping a U.S. tour Saturday in Los Angeles. "Let's not step back from the progress our countries have made... A generation later, it can be morning in North America." He also identified several tough issues — including Chapter 11 investor-state dispute panels, U.S. proposals for the auto sector, and a U.S. demand for a sunset clause.

Markets. The yield on the 10-year Treasury traded as high as 2.893% this morning as investors stay alert on inflation risks ahead of key U.S. CPI data on Wednesday. (Stock futures signal a rally at the open, about 145 points or 0.6%.) Budget Director Mick Mulvaney warned that there could be a spike in yields as the U.S. posts a larger deficit this year, while adding that the budget imbalance would fall over the long haul as part of President Donald Trump’s spending plans.

Investors withdrew $22.9 billion from U.S. stock mutual funds and exchange-traded funds during the first week of February, according to fund tracker EPFR Global, the highest total on record. And, about $43 billion went in the last four weeks of January.

Meanwhile, investors pulled more than $5 billion out of high-yield bond funds during the week ended Wednesday, according to EPFR. Big declines in high-yield energy bonds and other junk debt rattled financial markets in 2015. But observers expect a near-term bottoming in the high-anxiety mode seen recently: The gap between yields on U.S. corporate bonds and Treasury debt, known as the spread, has been relatively stable.




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