Talk about a sweetener.
An arcane provision moving through Congress as part of must-pass disaster aid legislation would let farmers earning more than $900,000 on average for the past three years qualify for President Donald Trump’s $12 billion program compensating producers for trade-related losses.
Ostensibly, the language would benefit any well-to-do farmers and ranchers. But the obscure $2 million provision was designed specifically with one constituency in mind, according to congressional aides: growers of fresh sweet cherries, predominantly in Washington state.
The fact that the provision specifically mentions Trump’s Market Facilitation Program to help farmers caught up in his trade row with China, rather than some natural disaster, on its face strains the definition of “emergency” that the supplemental aid package will carry, enabling it to skirt budget rules.
But while they haven’t been hit with the blunt force of an earthquake or typhoon, for Washington cherry growers China’s retaliatory tariffs are an economic disaster all the same. And because some technically earn too much to qualify, they currently get no help from Trump’s compensation fund.
An aide to Rep. Dan Newhouse a Washington Republican who pushed for the income waiver, pointed out the traditional $900,000 income limit for farm subsidy programs applies before operating expenses and before taxes take their bite. It also doesn’t take into account higher costs involved in cherry production than for other crops, as well as the substantial upfront investment and long lead time before cherries can be brought to market.
Since Trump imposed tariffs on steel and aluminum imports last April, followed by tariffs specifically on Chinese goods, China has retaliated by jacking up its own tariffs on U.S. fresh cherry exports from 10 percent to 50 percent. That’s effectively added over one-third to the price of U.S. cherries sold in China.
Newhouse’s staff said the trade war has led to some $96 million in losses to sweet cherry producers for the 2018 growing season. It has decimated a top export market, which a major Washington state grower told the House Ways and Means Trade Subcommittee last year accounts for as much as one-third of the company’s sales.
Cass Gebbers, CEO of Gebbers Farms, told the panel last July that if tariffs persisted into 2019, he stands to lose out to competitors in Europe and Turkey. He said his “razor-thin margin” business, based in Newhouse’s district, would likely have to cut back on production, cancel equipment purchases and lay off workers.
Short of an Earmark
Typically, lawmakers rush to take credit for provisions that would benefit their constituents. And Newhouse advocated for cherry growers’ successful inclusion in the Market Facilitation Program last year, along with other delegation members.
But Newhouse didn’t take any victory laps when the House passed his proposal earlier this year — no floor speeches, no press releases — though that’s not altogether unusual given he voted against the underlying bill, which was tied up in the government shutdown battle over Trump’s border wall.
The ambiguous nature of the income waiver, which doesn’t name any specific beneficiary, doesn’t fit the traditional definition of an earmark. In fact, the program would technically be open to any producer applying for aid that is currently above the income threshold.
That could include almond growers as well, another crop that hasn’t traditionally been eligible for subsidies but was included in Trump’s trade relief program. Californians, including both Democratic senators and House Republican leader Kevin McCarthy, successfully pushed the administration to add shelled almonds to the Market Facilitation Program, according to the Almond Alliance of California.
But waiving the $900,000 threshold has been driven mainly by cherry growers, according to aides, with Newhouse and former Ways and Means Trade Subcommittee Chairman Dave Reichert, R-Wash., now retired, driving the effort in the House.
It wasn’t included in a $7.8 billion disaster aid package that passed the House in the last days of GOP control in December, but House Democrats included it in the $14.2 billion package that chamber passed in January.
The Trump administration opposes the provision. The Office of Management and Budget said in its official views on the House disaster bill that it “makes unnecessary changes to the Department of Agriculture’s trade mitigation payments that would allow funds to go to those with adjusted gross income . . . over $900,000.” The statement called the existing threshold “consistent with other price and income support payments” to agricultural producers.
An aide said Sen. Maria Cantwell, a Washington Democrat, worked to drum up support in the Senate, though her staff didn’t respond to a request for comment. But the language was picked up in a $12.8 billion supplemental disaster package introduced by Senate Republicans in January, as well a $13.6 billion version introduced last week by Georgia Republican Sen. David Perdue and others.
In the multibillion-dollar disaster bills under consideration, $2 million qualifies as a rounding error, perhaps shielding it from more scrutiny. And Senate Appropriations Chairman Richard C. Shelby, an Alabama Republican, has said the eventual package his chamber takes up as early as this month is likely to be even larger than previously introduced aid packages.
A Senate aide confirmed the $2 million price tag for the income waiver, though since it is not a direct appropriation the figure isn’t listed in the bills. While the cost is relatively small, with individual payouts capped at $125,000, it’s still a limited universe of potential beneficiaries. And the current income thresholds are a sensitive matter on Capitol Hill and within the agricultural communities.
The GOP-led House last year tried to waive the general $900,000 income limit for USDA commodity and conservation programs set in the 2014 farm bill when it comes to disaster aid eligibility. The provision was part of that chamber’s five-year farm bill, which narrowly passed by a vote of 213-211 last June after being defeated on the floor a month earlier.
No Democrats voted for the House Republican farm bill. During floor debate, Wisconsin Democratic Rep. Ron Kind took aim even at preserving the $900,000 income cap, saying it should be cut nearly in half.
“Why is a farm entity with an adjusted gross income of over $500,000 a year still receiving taxpayer subsidies under this bill?” Kind said on the floor. “This legislation should be working for family farmers, not powerful special interests here in Washington.”
The Senate initially went in Kind’s direction, including a reduced threshold of $700,000 in adjusted gross income across farm programs in that chamber’s version that would have saved $107 million over five years, according to the CBO. But neither the House’s income waiver nor the Senate’s tighter limit made it into the final version.
Congress had made some targeted exceptions to farm payment limits in the past, such as for federally recognized Indian tribes.
And in a huge $89.3 billion disaster bill enacted in February 2018, lawmakers waived not only the income threshold but also the standard $125,000 payout cap for crop damages suffered as a result of the 2017 hurricane season, allowing payments of as much as $900,000.
Florida lawmakers inserted the language, dubbed the “citrus fix” for their state’s growers walloped by Hurricane Irma, according a source familiar with the provision.
Given the scope of trade-related damages, Washington state growers say income thresholds shouldn’t matter.
“We’re being impacted and the growers are being impacted regardless of how much acreage they have,” said Mark Powers, president of the Northwest Horticultural Council, which represents cherry, apple and pear producers. He said cherry growers have never been involved in a direct payment program until now, but the benefits are limited by the income threshold.
“This is the only aid package that’s going to be available and give us some time to figure out a solution or solutions with China and other countries,” Powers said. “It isn’t just cherries that will benefit.”
Still, the cherry provision is indicative of a broader problem, according to R.J. Lehmann, a senior fellow at the R Street Institute, which bills itself as a free-market think tank.
“This is the sort of thing that you get in disaster supplementals specifically, because no one looks at them and they’re very hard to vote against,” Lehmann said. “Whether or not they do merit assistance, they very well might. But that’s something that should be debated in a regular process and not just slapped on to a fast-moving bill.”
Jacob Fischler contributed to this report.First posted March 7, 2019 5:00 a.m.Correction This report has been corrected to reflect that a disaster aid program for citrus growers and others impacted by 2017 hurricanes waived the standard $900,000 adjusted gross income threshold to receive Agriculture Department payments.