Policy Updates: House Farm Bill Stoppage Continues | Omnibus Spending Process Drags On

Posted on 03/21/2018 5:46 AM

Perdue talks about RFS | U.S. sanctions coming on China, as farmers brace for reaction



Note on closings and delays. With a snowstorm bearing down on the East Coast, federal offices in the Washington area are closed, according to the Office of Personnel Management. Congress has delayed some hearings, but mostly plans to work through the snow. Economic data releases are still scheduled for release and the Fed has stated via Twitter that the conclusion of the Federal Open Market Committee (FOMC) will still take place at 1 p.m. CT and the presser with Fed Chairman Jay Powell will take place at 1:30 p.m. CT.



House farm bill fracas continues with Peterson statement on negotiations. While House Ag Chairman Mike Conaway (R-Texas) continues to be upbeat regarding the eventual fate of a new farm bill, the panel's ranking member, Rep. Collin Peterson (D-Minn.) released the following statement after sharing additional details of the Majority’s farm bill nutrition proposals with Democratic members of the House Agriculture Committee:

The Democratic members of the Agriculture Committee are unanimous in their opposition to the extreme, partisan policies being advocated by the Majority. This opposition will not change.”

Conaway acknowledged the situation is still deadlocked. “The plan has always been that once the ranking member and chairman sign off on the language, then [the farm bill] is released,” Conaway said. “I can’t get my ranking member to sign off on the language. He got a letter from his members saying he can’t. I’m in a bad circle trying to get this done. So, we’re still trying to figure out how we get past this impasse.”

The sooner Congress passes the omnibus spending bill, the quicker it will be able to pass the next farm bill, Conaway said. “Getting that big piece of legislation off the table will free up a whole lot of bandwidth.”

Perspective: A substantial rewrite of the pending farm bill food stamp language would likely have to take place before Peterson and very likely the Democratic House leadership aborts their current strategy of a no-way farm bill. While Democrats are denying an election-year play is underway, that is the consensus among veteran farm bill watchers.

Vice President Mike Pence in remarks Tuesday at an Ag Day event gave usual political comments on the topic when he said the Trump administration would support a farm bill “that delivers for America’s farmers.” Pence added that the Trump administration looks forward to working with the “great leaders of the House and Senate to pass a farm bill” later this year.

Another omnibus spending deadline missed. To little surprise, House and Senate leaders missed their self-imposed Tuesday night deadline to release the text of an omnibus spending bill, as negotiations continued late into the evening with no signs of a breakthrough. Disagreements persist over immigration, border security, tax breaks (199A “grain glitch” fix) and a rail tunnel under the Hudson River between New York and New Jersey.

Around a dozen issues were still unresolved as of late Tuesday, which would usually mean the need for another stopgap spending bill to give the lawmakers still more time to get done what they could not accomplish after weeks of prior talks. The current stopgap law expires at midnight Friday. Another continuing resolution (CR) would be the sixth of the fiscal year that began Oct. 1, but GOP leaders appears intent on not needing another CR. While lawmakers could advance a sixth CR to extend government funding into the weekend, any senator could object and force at least a brief shutdown. Sen. Rand Paul (R-Ky.) refused to allow a quick Senate vote on the current CR and caused an hours-long shutdown in February.

While House GOP leaders wanted to file the spending measure on Tuesday to give members a day to read it before voting Thursday, House Republicans could waive their own rules to bring up the bill quickly.

As for the Democrats, Senate Minority Leader Chuck Schumer (D-N.Y.) met Tuesday with his House counterpart, Nancy Pelosi (D-Calif.) to discuss the omnibus. Schumer later said that he expects Congress will approve the measure by the end of the week. "A few sticking points remain, but we are very close to signing off on legislation that both houses will be able to take up and pass by the end of the week," Schumer said. "I believe in the end, it will be a fair compromise that will be very helpful to the long-neglected middle class." He would not go into details. "We are at the end of negotiations. I don't want to jeopardize anything," Schumer said.

Conservative House GOP lawmakers have expressed concern about the package's cost, after a bipartisan deal reached last month to bust through budget caps first set in 2011 for the current fiscal year by $143 billion, or 13%. Conservatives are more comfortable with the defense portion of the agreement, which allows for an $80 billion, or a nearly 15% hike, than they are with the nondefense piece boosting spending by $63 billion, or 12%. House Freedom Caucus Chairman Mark Meadows (R-N.C.) expects his 30-plus member group to vote against the omnibus, which gives Democrats leverage to extract concessions in order to get a 216-vote majority for floor passage.

Funding for President Trump's proposed U.S.-Mexico border wall was called "the single biggest holdup" in the talks, according to Rep. Tom Cole (R-Okla.).

Democrats are pushing back against the biggest White House priorities, including the border wall and more money for Immigration and Customs Enforcement agents and detention beds for undocumented immigrants. "The most issues focus on border security issues," White House legislative affairs director Marc Short said. "There's a lot of other elements of Homeland Security appropriations... where we have the sticking spots."

Pelosi has reportedly offered the GOP a way to speed up consideration of the package: combine 11 of the 12 spending bills into one package and leave the Homeland Security measure in a CR to buy more time for negotiations. But Republicans have balked at that proposal.

Another potential compromise was mentioned by Rep. Jim Jordan (R-Ohio) who said he has heard that negotiators are discussing a compromise that would allow funding for the Gateway Program in exchange for money for a border wall. The Gateway Program is a $30 billion series of rail and transit projects under development to improve commuter services between New York City and Newark, N.J. The House-passed fiscal 2018 spending bill (HR 3354) would devote up to $900 million in federal funds to the program.

In the closely watched 199A “grain glitch” revision issue, Democrats insisted that Republicans agree to expand a low-income housing tax credit in return for the 99A fix, but House Speaker Paul Ryan (R-Wis.) nixed that compromise. But lawmakers seeking to get the revised language in the package haven't given up. “It's been dead, revived, dead, revived, and currently nothing is final,” Sen. John Thune (R-S.D.) said of the Section 199A corrective language.

USDA's Perdue: Not clear RFS changes can be done administratively, may need Congress. Making changes to U.S. biofuel policy without putting a cap on Renewable Identification Numbers (RINs) is the hope of the Trump administration, USDA Secretary Sonny Perdue said in remarks at the National Press Club. "We're hoping that we can resolve it where we will not see RINs capped," he said, signaling the potential solution that would hopefully "increase the RIN availability, guiding RIN prices down."

The Trump administration will instead attempt to bring down RIN prices via a vapor-pressure waiver that will boost demand for E15. However, Perdue said it was not clear whether the administration can make the changes on their own or not. "The White House is trying to determine whether they need to make a call on a decision, or allow Congress to do it," Perdue said. “We will not see RINs capped, but market prices, affecting the RVP waiver, that allows 15%, E15 to be sold year-round, which we believe will increase RIN availability, driving RIN prices down,” Perdue said. When asked whether he was concerned that President Trump might end up favoring a seemingly simple solution like a cap on RINs prices. "We hope that's not the case," Perdue said Tuesday. "We've impressed upon him that simple is good in some things, but not good in others. I don't know that the president will make that choice." He added: "This is a complex issue that I think needs a reasonable solution that doesn't include a RINs cap."

Perdue pointed out that since the RFS discussions have lowered RIN prices from a prior 98 cents to 38 as of last Friday, “so the conversation has already been helpful in that area of driving RIN prices down.”

I think the White House is trying to determine whether they need to make a call on a decision or allow Congress to go back and fix it," Perdue said. "We've had some members of Congress call and say, 'We've been working on this — let us have it.”

Meanwhile, a meeting between Perdue and EPA Administrator Scott Pruitt had been scheduled for Tuesday, but Perdue suggested it had been pushed off. "Not this week," he said.

Most veteran Washington sources think the RFS issue will be punted to Congress, with perhaps the administration seeking public comments on various possible changes via the upcoming volume requirements for 2019 ethanal and 2020 biodiesel. Sen. John Cornyn (R-Texas) and Rep. John Shimkus (R-Ill.) have been working for over a year on a bill to overhaul the RFS. Shimkus has reportedly urged the White House to refrain from making regulatory changes to the program in an effort to protect his and Cornyn's work. While details of the Cornyn/Shimkus bill have not been released, it is rumored to include a national octane standard, and possibly a new kind of RIN for sales of high ethanol blends of gasoline.

Sen. Chuck Grassley (R-Iowa) said he remained concerned about the outcome of the administration’s negotiations. Grassley met with Trump and oil and biofuel executives March 1. "I went away from the meeting with the feeling the president doesn’t really understand the damage a cap on RINs will do," Grassley said. "I’m very fearful and hope he will take a look at the alternatives. Anything is better than a RINs cap."

Trump wants three-year extension of fast-fact trade negotiating authority (TPA). President Trump is formally asking Congress to extend his current authority to negotiate trade agreements by three years. The existing Trade Promotion Authority (TPA) enacted under President Obama is due to expire in July, unless Trump requests a three-year extension by April 1. Congress would then have a three-month window to block renewal by passing a resolution of disapproval. TPA sets negotiating goals for the president and prevents Congress from making changes to deals that the president signs and sends to Capitol Hill for approval.

Trump comments. "I hope my administration can continue to work with the Congress to pursue new and better trade deals for America's workers, farmers, ranchers, and businesses," Trump said in a message to Congress. "Extension of trade authorities procedures is essential to fulfill that task and to demonstrate to our trading partners that my administration and the Congress share a common goal when it comes to trade."

NAFTA 2.0 linkage to TPA extension. Senate Finance Chairman Orrin Hatch (R-Utah) tied the TPA renewal process to concerns that many Republicans have about Trump administration proposals for revamping NAFTA. Congress will use its authority to review Trump's request "to emphasize that the administration must adhere to the TPA negotiating objectives and to encourage the president to seek new agreements with our trading partners," Hatch said in a speech to business groups.

Coming possibly Thursday: White House crack down on alleged improper Chinese trade practices by making it significantly more difficult for Chinese firms to acquire advanced U.S. technology or invest in American companies. The administration plans to release on Thursday a package of proposed punitive measures aimed at China that include tariffs on imports worth at least $30 billion and possibly much higher. Final details of the plan, including the amount of imports to be hit by tariffs, remain fluid. The White House has authority to impose tariffs under section 301 of the Trade Act of 1974.

As previously noted, tariffs won’t be imposed immediately. Rather, U.S. industry will be given an opportunity to comment on which products should be subject to the duties.

In the coming details, the White House is expected to announce investment restrictions by Chinese firms in the U.S. and will direct the Treasury Department to outline rules governing investment from China.

The Trump administration believes that Chinese state-owned firms buy U.S. technology not for commercial purposes, but to apply for military use and otherwise gain an edge in the race for global technological dominance. Also, Beijing, in requiring U.S. companies to form joint ventures to do business in China, then pressures them to transfer important technology to their Chinese partners. The U.S. also contends Beijing improperly subsidizes Chinese companies looking to overtake U.S. rivals in such advanced technologies as semiconductors, artificial intelligence and robotics.

Chinese officials have said that they are improving their protection of intellectual property and liberalizing their economy. They also complain that the U.S. hasn’t given them a specific list of demands that they need to meet to head off tariffs.

Key Trump administration word: reciprocity. Trump administration trade policy officials in remarks ahead will make clear that the U.S. will impose restrictions on Chinese investment similar to those that U.S. firms face in China. That could mean that the U.S. would insist that Chinese firms form joint ventures before doing business in the U.S., unless China dropped those restrictions.

U.S. exporters and industry stakeholders brace for Chinese reaction. Tariffs will likely cause China to retaliate, said Clement Leung, Hong Kong’s representative in the U.S. Chinese officials “cannot show any weakness” at a time when the country’s leader, Xi Jinping, has just been confirmed for his second term, Leung said, according to the Wall Street Journal.

Proposed China tariffs could negate 20 percent of tax reform benefits: Tax Foundation. If the coming U.S. sanctions against China total $60 billion, they “would wipe out more than 20% of the recently passed tax cuts expected in 2019,” according to an assessment by the Tax Foundation. “And, as 45 trade associations warned in a letter to President Trump, these tariffs could potentially provoke retaliation that would negatively impact U.S. agriculture, goods, and services exports and further raise costs for businesses and consumers.”

Faced with higher prices, because of the taxes they would pay on their imports, companies have two options, the group said: “First, they can pass the higher costs along to us, the consumers. As a result, Americans would be forced to pay higher prices for more than 100 products, ranging from electronics to clothes to shoes. This would leave consumers, and especially lower-income households, with less money left in their budget to spend on other items, which in turn would reduce economic activity.”

If companies cannot pass the higher costs on to their customers, then the second option is that “they must absorb the higher costs. This reduces profits, which reduces the amount of money companies have to invest, hire workers, or increase wages. In businesses with low profit margins, it could mean lower returns to shareholders, or even going out of business. Regardless of whether the cost of tariffs is passed on to workers, shareholders, or consumers, it is American households that bear it.”

Many products the U.S. imports from China are components used as inputs to produce other goods, otherwise known as intermediate goods. Placing taxes on these inputs, the foundation said, “raises the cost of production for U.S. companies compared to foreign competitors, placing U.S. companies at a comparative disadvantage and further reducing economic activity. Higher prices for businesses, reduce profits and can lead to losses in employment, as was the result for companies that had to pay higher prices caused by steel tariffs in 2002.”

The Tax Foundation's conclusion: “Though these tariffs would discourage imports from China, they would also cause direct and immediate harm to U.S. businesses and consumers that could intensify over time if retaliatory actions were taken. There is wide agreement that China’s unfair trading practices need a response; however, the proposal of broad tariffs under consideration is not likely to result in changes in Chinese government policy. Imposing a new tax of $60 billion on Americans would put U.S. businesses at a comparative disadvantage, increase prices for American consumers, and reduce economic activity and growth while likely failing to achieve policy goals.”

Other items of note:

  • EU approves Bayer takeover of Monsanto after concessions. The European Union has approved Bayer’s buyout of Monsanto in a massive agriculture business deal but says they will have to shed some $7.4 billion in firms and other remedies to ensure fair competition in the market. The $57 billion takeover has been watched by rivals and environmental groups, who are fearful that the number of players in the business of selling seeds and pesticides will shrink further and give one company a suffocating grip on the market. EU Antitrust Commissioner Margrethe Vestager said today that the remedies proposed by Bayer and Monsanto are worth well over 6 billion euros in business and “meet our competition concerns in full.”

  • Mississippi Gov. Phil Bryant is expected to appoint Cindy Hyde-Smith to take over the seat of Sen. Thad Cochran (R-Miss.) when he steps down April 1, Politico reported. Hyde-Smith is the state’s agriculture commissioner and a cattle farmer. A press conference is scheduled for today at a train depot in Brookhaven, Hyde-Smith's hometown, Hyde-Smith has previously served in the state Senate for three terms and is a former Democrat, having switched parties in 2010. A special election will be held for the remaining two years of Cochran’s term on Nov. 6. All candidates will run on one ballot, without party identification listed.

  • U.S. Trade Representative Robert Lighthizer is slated to testify this morning at a House Ways and Means Committee hearing on the U.S. trade agenda... if the current D.C. weather does not postpone this and other events.

  • U.S wants to limit consumer warnings on sugary drinks and other processed foods in NAFTA 2.0 talks. The Office of the U.S. Trade Representative has tabled a proposal in the NAFTA renegotiation that aims to limit the ability of Canada and Mexico to require consumer warnings on sugary drinks and other processed foods, the New York Times reports. The proposal would prevent the use of any warning signs or symbols, as officials in Latin America and Canada are discussing more ways to warn consumers of health risks. Link to article.

  • Canada’s envoy to the U.S. says there has been substantial progress in NAFTA discussions over the past few days, the Canadian Press reports. Link to article.

  • Mexican presidential front-runner taps NAFTA lead negotiator if he wins. Three-time presidential candidate Andrés Manuel López Obrador said that if he wins, he will name Oxford-educated Jesús Seade Helú to replace Kenneth Smith Ramos as Mexico’s chief NAFTA negotiator. Seade has previously served at the World Bank, International Monetary Fund and WTO.

  • Finance ministers and central bankers from the Group of 20 countries failed to reach a shared outlook on trade after two days of talks in Argentina, but the communique released recognized the "need for further dialogue and actions." Attendees also reaffirmed a set of principles that had been adopted last year at the G20 summit in Hamburg by continuing to "fight protectionism, including all unfair trade practices."

  • Jones against Chinese chicken in school lunch programs. Rep. Walter Jones (R-N.C.) asked the House Appropriations Committee to make sure Chinese-processed poultry is not allowed in school lunch programs, claiming that “foreign countries are regularly trying to export low-quality, high-risk foods to make a profit.” Link for statement.

  • China’s state-run Global Times explains how subsidized U.S. soybeans hurt Chinese farmers. Link to article.

  • Interior will hold its region-wide lease sale today for all available parcels in federal waters of the Gulf of Mexico. Secretary Ryan Zinke said today’s sale — which Interior has touted as “the largest in U.S. history” — would serve as “a bellwether” on where oil and gas companies want to spend their money drilling. The auction will offer up 14,776 blocks across about 77 million acres.

  • The food truck industry reached a record $2.7 billion in forecasted revenue in 2017 and has seen an annual growth rate of 7.9%," according to a U.S. Chamber of Commerce Foundation report out today. Link to report.

  • Shipping companies world-wide are facing a tough choice on meeting impending emissions rules: Pay many millions of dollars now or perhaps even more later on, according to the Wall Street Journal. The ship operators are bracing for new caps on sulfur emissions that go into effect in less than two years, the article reports, and they’re considering whether to retrofit vessels with “scrubbers” which can cost up to $10 million or depend on cleaner fuels that are some 55% more expensive than current bunker charges. Maritime executives say the sulfur restrictions will cost the industry some $40 billion, which will likely be passed along to shipping customers through higher freight prices. With some doubting enough low-sulfur fuel will be available, many operators are turning to sulfur-trapping exhaust scrubbers. But even those may not be enough to meet stricter pollution caps expected in the future, the WSJ article concludes. Link to article.

  • Peter G. Peterson, the billionaire financier and philanthropist died yesterday at his home in Manhattan, New York. He was 91. He was secretary of Commerce under President Richard M. Nixon, led government commissions and advisory bodies and for 22 years was chairman of the influential Council on Foreign Relations in New York, succeeding the banker David Rockefeller, who died last year, also on March 20. A former USDA official recalls Peterson “eating a steak for breakfast right ahead of a meeting with Russian officials” on trading farm products between the U.S. and the then Soviet Union.

  • The suspect believed to be responsible for a series of bombings across Austin is dead following an incident involving officers along I-35 in Round Rock, Texas. Police were closing in on the reported "white male" when he killed himself by detonating some sort of explosive device, according to CBS Austin affiliate KEYE-TV reports.

  • You know you’re an Aggie when… You think Snapchat is talking about the food stamp program.

Markets. The Dow on Tuesday was up 116.36 points, 0.47%, at 24,727.27. The Nasdaq rose 20.06 points, 0.27%, at 7,364.30. The S&P 500 edged up 4.02 points, 0.15%, at 2,716.94.

Fed meeting conclusion on tap with attention beyond expected rate rise. The Federal Open Market Committee (FOMC) meeting conclusion is expected to see the Fed increase the range on the Fed funds rate by 25 basis points (the CME FedWatch tool puts odds at over 94%) to a level of 1.5% to 1.75%. That will put attention first on the post-meeting statement and how the Fed characterizes the "risks" to the US economy and whether they update the statement and potentially remove references to U.S. monetary policy being accommodative. The updated Fed projections will be scoured for how Fed officials now view the economy and policy path compared to December. Among the keys will be how many times the Fed signals it expects to increase rates in 2018 (three versus four) and whether the U.S. economic outlook has changed in the wake of tax reform and fiscal policy changes. And Fed Chair Jerome "Jay" Powell's first session with the press will be scrutinized for not only what he says but how he says it. Those remain the keys to watch as borrowing costs are expected to rise.


 

Add new comment