The rusty welded rod is the position control's feedback rod for the 3pt hitch lift height. It is shown on the attached diagram as item #2. You should be able to see if this is the cause of your no-lift situation by manually (by hand) raising the lift arms. The feedback rod should move freely with no binding or other interference. There are two nuts on this rod that should be tight when in use but need to remain rust-free to allow for adjustments. It is obvious that there was a problem with this rod at some point in the past and it would be a good idea to replace it with a new one.
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