Trump's New $16 Billion Bailout for Farmers

Plus, finally, a disaster relief deal!

White House Announces New $16 Billion Bailout for Farmers

The Trump administration on Thursday unveiled a $16 billion aid package for U.S. farmers hurt by President Trump’s ongoing trade war with China and other nations.

Agriculture Secretary Sonny Perdue said the money would come from the tariffs on Chinese imports being collected by the U.S. Treasury, which he falsely claimed were being paid by China, sticking with a now well-established and misleading script.

“China’s going to pay for these, the $16 billion of tariffs coming in,” Purdue told Fox Business.

In fact, tariffs are paid by American businesses and consumers, who will be the ultimate source of the bailout funds.

The payments: The aid package is $4 billion larger than the $12 billion package offered last year, and Bloomberg’s Mike Dorning and Jennifer Jacobs reported that the payments for farmers will be more generous this time around. Last year, farmers received $1.65 per bushel for soybeans, 14 cents per bushel for wheat and 1 cent per bushel for corn; the new package will reportedly offer $2 per bushel for soybeans, 63 cents per bushel for wheat and 4 cents per bushel for corn. Growers of other commodities including cotton, chickpeas and cherries will also be eligible to receive subsidy payments.

The program will pay about $14.5 billion directly to farmers starting as soon as this summer, distributed through the Commodity Credit Corporation. An additional $1.4 billion will be used to purchase surplus fruits, vegetables, meat and milk and distribute them to food banks and schools. About $100 million will be used to develop new markets for American exports.

Farmers still not happy: Sen. Joni Ernst (R-IA) said the payments may not be enough to satisfy farmers, despite being more generous this year. “Corn farmers are going to be very upset about this,” Ernst said. “It’s better than the 1 cent per bushel that they got earlier but it’s not enough.”

The U.S. agricultural sector has been under strain for several years due to falling commodity prices, Dorning and Jacobs said, and American farm income dropped by 16% last year, to about half the level it was in 2013.

Worries about market distortions: Economists have warned that the subsidy payments may influence farmers’ decisions about which crops to grow. Higher subsidies for soybeans could prompt farmers to move away from corn to maximize their payments from the government. The U.S. Department of Agriculture said that as of Sunday farmers had planted only 49% of the corn they said they had planned to plant, the lowest percentage at this point in the year since 1980. While a wet spring is likely playing a role in the delay, a shift toward higher soy production may be involved as well.

Trump's Hikes Double the Cost of Tariffs to Consumers: Fed Report

President Trump’s recent increase in tariff rates on $200 billion worth of Chinese imports raises the overall cost of tariffs on Chinese goods for U.S. households to $106 billion a year, according to a new analysis published on the New York Federal Reserve Bank’s blog.

Individual households will pay $831 per year on average in added costs if the tariffs remain in place, the economists said. That roughly doubles the size of the impact from the previous tariff levels, which were costing households an estimated $419 on average per year.

The higher tariffs could lead to a drop in revenues for the Treasury Department, because the cost increase is so large that it will drive U.S. importers to look for alternative sources of goods, such as Vietnam. The substitute goods would likely be more expensive for consumers than before, but if they come from non-Chinese sources, they won’t provide a revenue bump for the Treasury.

“[A]ccording to our estimates, these higher tariffs are likely to create large economic distortions and reduce U.S. tariff revenues,” the authors Mary Amiti, Stephen J. Redding, and David E. Weinstein concluded.

Not coincidentally, retailers including Walmart, Target and Home Depot warned this week that the tariffs are causing them to review their financial outlooks and consider price hikes. "We're concerned about tariffs because they lead to higher prices on everyday products for American families," Target CEO Brian Cornell said Wednesday.

Congress, White House Reach Deal on $19.1 Billion Disaster Aid Bill

Senators on Thursday passed a $19.1 billion disaster relief package after reaching a hard-fought agreement to end a months-long impasse. The deal reportedly came after President Trump agreed to support the bill even though it does not include any of the $4.5 billion in emergency funding his administration had sought to help feed and house migrants at the southern border.

Those additional border funds were just the latest in a line of partisan stumbling blocks, including Trump’s reluctance to provide more money for Puerto Rico, that had stalled the disaster relief legislation and delayed additional funds intended to help speed recovery efforts for areas hit by hurricanes, floods and wildfires.

The background: Disaster bills often receive bipartisan support — and don’t often run into the prolonged and repeated delays that befell this package.

“Congress has not passed a broad disaster relief package since February 2018, when lawmakers included nearly $90 billion in aid in a budget deal that reopened the government after a government shutdown,” The New York Times Emily Cochrane explains. “In the year since, natural disasters have devastated the country: hurricanes in Florida, Georgia, Alabama and the Carolinas, wildfires in California, and floods across much of the Midwest.” More than 1 million Puerto Rico residents saw their food stamp payments cut after the program’s emergency funding expired in March.

What’s next: An 85-8 vote in the Senate Thursday afternoon sends the bill to the House. Democrats are reportedly expected to seek to pass the legislation by unanimous consent on Friday. A spokesperson for House Appropriations Committee Chairwoman Nita Lowey (D-NY) told reporters earlier in the day that she wants to pass it through the House as soon as possible.

“Senators feel confident Trump will sign the deal, but White House officials on Thursday afternoon were trying to quickly scrub through all the details to see what was in the package and what had been left out,” The Washington Post reported.

Sen. Richard Shelby (R-AL), who chairs the Senate Appropriations Committee, told reporters that lawmakers hope to revisit the additional border funding issue separately when they return from their Memorial Day recess, according to the Post.

Where the money will go: The legislation provides more than $3 billion for farmers hurt by natural disasters in 2018 and 2019; more than $1 billion to repair hurricane and flood damage to Marine and Air Force bases; and $600 million for nutrition assistance programs (food stamps) in Puerto Rico. You can find a summary of the legislation, released by Shelby’s office, here.

Senate Advances $750 Billion Defense Bill

The Senate Armed Services Committee advanced a plan Wednesday to provide roughly $750 billion for defense in 2020. Here’s how the funding breaks down:

  • Base Pentagon budget: $642.5 billion
  • Overseas Contingency Operations account: $75.9 billion
  • Security programs at the Department of Energy: $23.2 billion
  • Replacement of military funds shifted to the southern border: $3.6 billion
  • Disaster relief funds for military installations: $3.3 billion

While the topline number matches President Trump’s request for defense spending next year, the breakdown is different. Most notably, the Senate rejected the White House plan to push $164 billion through the warfighting OCO account as part of an effort to evade the spending caps imposed by the Budget Control Act, The Hill’s Rebecca Kheel reported. The Senate bill also lacks an additional $3.6 billion Trump had requested for border wall construction.

Chart of the Day

Nearly 24 million Americans who have employer-provided health insurance plans spent a large share of their income on health care, according to a new report by The Commonwealth Fund. The report focused on premiums and out-of-pocket costs for those employer-provided coverage. Here’s a state-by-state breakdown of median annual spending on premiums and out-of-pocket costs. Click through to the report for an interactive version of the chart and more data.

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