September 18, 2019

Budget Issues; Biofuels; Farm Bill; Regulations; Trade; and Political Notes

Budget Issues

Robert Pear reported in yesterday’s New York Times that, “When Congress handily passed a bill to set payroll tax rates, jobless benefits and Medicare doctors’ fees for the next two months, it seemed to end an epic political struggle between President Obama and Republicans on Capitol Hill. In fact, that was just the beginning.

Every issue in dispute remains unresolved, waiting to be addressed when Congress returns next month for an election-year session in which agreements could be even more elusive.”

The Times article pointed out that, “Even if Democrats and Republicans could agree on extending the payroll tax cut, they fundamentally disagree about how to offset the additional cost, $100 billion for the last 10 months of 2012.

“The Senate majority leader, Harry Reid of Nevada, made clear on Friday that Democrats would keep pressing for a tax surcharge on individual income over $1 million — a demand dropped by Democrats in talks that led to the two-month compromise.

“‘There should be a fair tax on rich people,’ Mr. Reid said.”

Yesterday’s article added that, “House Republicans would pay for the legislation, in part, by freezing the pay of federal employees through September 2013.

“Democrats generally oppose that idea.

“A 20-member conference committee will try to work out differences between the House and the Senate on a yearlong bill. Mr. Reid said he had appointed Senator Benjamin L. Cardin of Maryland to the panel because he knew that Mr. Cardin would guard the interests of federal employees. More than 275,000 federal workers live in Maryland.”

Felicia Sonmez reported yesterday at the 2chambers Blog (Washington Post) that, “When Congress reconvenes in January, at the top of its agenda will be an effort by a bipartisan, bicameral group of lawmakers to strike a deal that either finds savings in the federal budget or raises taxes — or both.

Sound familiar?

The mandate of the 20 lawmakers tapped to serve on the payroll tax conference committee is somewhat similar to that of the bipartisan ‘supercommittee’ that fell short in its effort to tame the debt this fall. But there are several key differences between the two panels.”

Yesterday’s update added that, “Both panels were charged with finding a minimum amount in budget savings. The 12 members of the supercommittee were told to pinpoint at least $1.2 trillion in deficit savings before a Thanksgiving deadline. The payroll tax conference committee must strike a deal before Feb. 29 on a nearly $170 billion package that extends the payroll tax holiday, unemployment benefits and the ‘doc fix,’ which prevents a drop in reimbursement rates for doctors who see Medicare patients.

“The new panel is likely to face the same hurdle that has played out in Congress for much of this year – where to cut the budget and where to turn for new revenue.”

And, Lori Montgomery reported in today’s Washington Post that, “Despite round after round of negotiations — first over the operating budget, then over the federal debt ceiling and finally in the deficit ‘supercommittee’ that disbanded last month —Republicans and Democrats never resolved the most fundamental budget questions: whether to raise taxes and how to control spending on an aging population.

“There was some movement. Some Democrats, including President Obama, conceded that Social Security and Medicare pose a long-term threat if there are no constraints on benefits. Some Republicans, including House Speaker John A. Boehner (R-Ohio), declared themselves willing to talk about raising taxes, a break from the GOP’s long-standing and vigilantly enforced party line.

“But Boehner was not able to lead his top lieutenants and unbending freshman class to embrace a compromise on taxes as a first step toward their debt-
reduction goals. In more than a dozen interviews, lawmakers and independent analysts blamed leaders in both parties for failing to seize the moment and then retreating to their respective corners to prepare an election-year assault on the ideas offered by the other side. Many expressed their frustration with an unusual candor that reflected exhaustion as well as disappointment.”

Today’s Post article added that, “Senate Budget Committee Chairman Kent Conrad (D-N.D.), a leading force behind the fiscal commission, said that ‘the American people still don’t believe you need to make hard choices,’ not even after a year when the debt dominated Washington news.

“‘They believe you should balance the budget,’ Conrad said. ‘But when it comes down to doing the things that need to be done to accomplish that, they don’t support them. Until the American people believe we need to change some things, it’s unlikely we’re going to accomplish them here.’”

Meanwhile, Reuters writer Margaret Chadbourn reported yesterday that, “The White House plans to ask Congress by the end of the week for an increase in the government’s debt ceiling to allow the United States to pay its bills on time, according to a senior Treasury Department official on Tuesday.

The approval is expected to go through without a challenge, given that Congress is in recess until later in January and the request is in line with an agreement to keep the U.S. government funded into 2013.”

The article explained that, “Under the agreement struck in August during the showdown over the government’s debt limit, the cap is automatically raised unless Congress votes to block the debt-ceiling extension. Lawmakers have 15 days within receiving the request to vote, which is largely symbolic because the president can veto it and Congress would be unlikely to muster the two-thirds majority to override it. Moreover, the U.S. House of Representatives also is in recess until January 17.”

Stacy Kaper and Catherine Hollander reported yesterday at National Journal Online that, “Although the latest effort to increase the ceiling on borrowing comes as no surprise, it remains unclear whether the added funds will be enough to keep the government going through the 2012 elections. If not, it could reignite another protracted debt-ceiling showdown and threaten an economically painful stalemate before November.”



In other budget related news, yesterday’s Need-To-Know Memo (daily morning Email from National Journal) reported that, “The payroll-tax cut passed by Congress on Friday could herald the beginning of the end of corn ethanol’s status as a sacred cow in U.S. politics. The package did not extend the $6 billion in annual tax breaks for corn ethanol, which expire on Dec. 31, despite support from farm-state lawmakers and aggressive industry lobbying. But a diverse coalition of environmentalists and budget hawks had pushed for months to ensure that the once-untouchable tax break would sunset this year.”

Also yesterday, the “Washington Insider” section of DTN reported (link requires subscription) that, “Producers of advanced and cellulosic ethanol and biodiesel are calling on Congress to extend tax incentives for their products beyond their scheduled expiration of midnight Saturday, Dec. 31. This is not going to happen until 2012, if then.

“In a letter to congressional leaders, the Advanced Ethanol Council said the tax credits ‘are vital to the ongoing development of the domestic advanced ethanol industry.’ The group recommends that Congress extend the tax credit provisions for at least five years.”

Ryan Tracy reported in today’s Wall Street Journal that, “Hopes for a surge in production of alternative biofuels are falling flat, and the U.S. expects to continue to rely on corn- and sugarcane-based ethanol to meet a national mandate for renewable fuels in 2012.

“The Environmental Protection Agency said Tuesday that a tiny fraction—less than one-tenth of 1%—of renewable fuels required to be used in the U.S. next year will come from cellulosic biofuel, based on projected production volumes, despite a congressional target that the fuel made from plant stalks and other inedible materials account for more than 3% of the total.

The agency sets volume requirements for renewable fuels every year to implement a 2007 law that requires refiners to use increasing amounts of renewable fuels in gasoline.”

Today’s Journal article explained that, “Cellulosic fuel, which can be made from plant waste such as corncobs, is still far from being able to meet volume mandates laid out by Congress, the EPA said Tuesday, confirming a draft analysis it had published earlier this year. Instead, the agency will require refiners to use other types of advanced biofuels, including sugarcane ethanol, to meet the national standard.

The EPA said it would set the required volume of cellulosic fuel at 8.65 million gallons for 2012. Congress had set a goal of using 500 million gallons next year, on the way to 16 billion gallons in 2022. The EPA has the option to cut the cellulosic-fuel target based on industry capacity to produce the more advanced fuels.

“Although the EPA set the requirement well below Congress’s goal, its decision still irked refiners. Companies will have to buy credits from the EPA if they can’t find enough cellulosic ethanol to purchase—even though the fuel may not be available. ‘The [EPA’s] cellulosic number is still conjecture-based fantasy,’ said Stephen Brown, vice president for government affairs for refiner Tesoro Corp.”

Meanwhile, Hal Weitzman reported yesterday at The Financial Times Online that, “In previous US elections, it was political suicide to campaign in Iowa – the first battleground of presidential races – against subsidies for corn-based ethanol, an issue of keen interest in the strongly agricultural state.”

The FT article added that, “Yet in this electoral cycle, opposing federal support for the industry – and for broader agricultural subsidies – is both common and anything but a hindrance.”

The extensive FT article pointed out that, “The ability of candidates to be popular in Iowa while opposing federal support for ethanol indicates how much the political debate has changed in the past four years. The Hawkeye State may be the US’s biggest corn and soyabean producer, but strictly agricultural issues have not featured prominently in the campaign.

“In part that is because following the economic downturn, the top issue on the minds of voters in is the $15tn federal debt. It is also because farmers, who are enjoying a boom in crop prices and farmland, generally have less to worry about than their urban counterparts.”

Along these lines, in a segment last night on the PBS NewsHour, Iowa state Republican Party chairman Matthew Strawn noted that, “Well, as a farm boy from eastern Iowa, I can absolutely tell you that the [ag] economy has kept Iowa booming for the most part.”

O. Kay Henderson, the news director of Radio Iowa added that, “It is indeed because of the agricultural sector, I think, that Iowa is seeing a good economic outlook.

“And farmers are a pessimistic lot. So, having farmers be a little bit more optimistic about things does affect the way that the culture reacts to news and events here in Iowa.”


Farm Bill

An update posted yesterday at the Litchfield Independent Review Online (Minn.) indicated that, “The House Agriculture Committee will go back to work, possibly in February, to try to craft a Farm Bill that can garner enough support for passage in both houses of Congress — a prospect over which [Rep. Collin Peterson (D-Minn.)] seemed less than optimistic.

The committee will use what it put together for the Super Committee as a starting point.”

After more detailed reporting on some aspects of the “supercommittee” Farm Bill draft, yesterday’s update noted that, “Despite all of these changes aimed at creating efficiencies and reducing costs, Peterson believes the Farm Bill will face considerable challenges. He still hopes that, if work begins in February, the Ag Committee can have a bill ready for action by May, but it won’t be easy.”

Nicole Weskerna reported yesterday at the Daily Chronicle Online (DeKalb, IL) that, “Congress has been in the process of forming the 2012 Farm Bill, and those with local farming ties hope representatives make crop insurance and conservation measures a top priority in next year’s bill.

“Tracy Jones, who farms north of Clare, said he believes many farmers hope the crop insurance gets carried over into the new bill because there’s so much risk involved in farming and agriculture.

“‘Federal crop insurance gives us a big safety net,’ he said. ‘The farming economy is pretty good, but the risks are actually greater than ever.’”



DTN writer Todd Neeley reported yesterday (link requires subscription) that, “EPA raised the hackles of U.S. agriculture this year when the agency issued a guidance document in April for field inspectors to make determinations on the definition of waters of the U.S. in the Clean Water Act.

“Ag groups and EPA Administrator Lisa Jackson said the guidance document would expand the number of water bodies subject to the act, increasingly leaving questions of science up to individual inspectors. This raises a fundamental question about EPA: Does the agency do enough to develop the science it uses to draft and enforce regulations?

Rod Snyder, public policy director for the National Corn Growers Association, said it would have made more sense for EPA to undertake a rule-making process to expand CWA authority instead. This would have subjected the process to scientific scrutiny.”

The DTN article noted that, “EPA’s use of science is the subject of a new congressional inquiry. Some agriculture industry groups and others question whether the agency is relying more on court-driven policy and less on science to enforce environmental regulations. This recently was focused on in congressional hearings.”

In his detailed article, Mr. Neeley also indicated that, “EPA has taken little action on five independent evaluations completed on the agency’s science program in the past 20 years, Government Accountability Office representative David C. Trimble told the House subcommittee on energy and the environment in his Nov. 17 testimony.

Paul Schlegel, director of public policy for the American Farm Bureau Federation told DTN in an interview that there is ongoing concern the agency will continue to rely on lawsuits from environmental groups instead of science to enforce regulations.”



Bernie Becker and Vicki Needham reported yesterday at The Hill’s On the Money Blog that, “The Treasury Department on Tuesday declined to name China a currency manipulator — a label that lawmakers in both parties want slapped on Beijing.

“In a semi-annual report released Tuesday, Treasury reiterated that China needs to be more flexible in appreciating the yuan.”

The New York Times editorial board noted yesterday that, “China’s economy seems to be in trouble, which could be a very big problem for the world unless China’s leaders and trading partners ensure that economic strains in the world’s largest exporting nation do not lead to trade confrontations around the globe.”

The Times added that, “A hard landing in China would have an immediate impact from Brazil to Russia, whose exports of steel, lumber and other commodities fed China’s construction boom. And it will slow the world economy, which relies on China as one of the only remaining engines of growth.

But the bigger risk could be a trade war. Chinese leaders eager to hang on to power by showing continued economic growth may be tempted to pursue beggar-thy-neighbor strategies and subsidize exports in ways that would further destabilize a fragile world economy already buffeted by a crisis in Europe.”

The Obama administration must also act with care. It is justified in challenging illegal trade practices, including pursuing its case at the World Trade Organization against illegal subsidies of Chinese makers of solar panels. But it should act multilaterally, including mustering other countries to add to the pressure on Beijing to act by the rules. Unilateral initiatives, like those in Congress to punish China for its cheap currency, are likely to cause more harm than good,” the Times noted.


Political Notes

Jennifer Steinhauer reported in today’s New York Times that, “Senator Ben Nelson, the embattled two-term Democrat from Nebraska, said Tuesday that he would not seek re-election in 2012, giving Republicans a decided advantage in their drive to win his Senate seat and a leg up in their effort to bring the Senate under Republican control.”

“The announcement makes Mr. Nelson the seventh member of the Democratic caucus to decide to retire from the Senate after the current term.”

Keith Good

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