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“Analysis from Washington”- By Dan Morgan- CBO and the Farm Bill

CBO and the Farm Bill

By Dan Morgan- Dan is a special correspondent of The Washington Post and a Transatlantic Fellow at the German Marshall Fund of the United States. “Analysis from Washington” is posted exclusively at FarmPolicy.com.

Lots of important ideas were brought forward during the House Agriculture Committee’s first day of drafting a new five-year farm bill this week.

Dennis Cardoza (D-Calif.), representing California’s dusty Central Valley, proposed spending $305 million to help farmers meet federal air quality requirements. USDA already helps farmers comply with water quality rules through EQIP, the Environmental Quality Incentives Program, so why not air quality regulations?

Stephanie Herseth Sandlin (D-S.D.), citing environmental concerns about the plowing of virgin prairie to grow biofuel crops, thought the committee should consider a “sodsaver provision” to protect sensitive lands.

Tim Walz (D-Minn.) proposed incentive payments to landowners who rent or sell land to beginning farmers.

But for most of the day, subcommittee chairman Tim Holden (D-Pa.) acted the part of a benevolent parent with a tight family budget. One after another, the ideas were turned aside by Holden, who said there was just no money to pay for them at this stage of writing the farm bill.

Unless the Democratic leadership frees up an additional $20 billion for the farm bill, farm bloc lawmakers say, it will be hard to finance innovative new programs.

But is the committee’s bank account really so meager? Or are the claims of penury mainly smoke and mirrors?

Under budget rules, the committee actually has $152 billion more to spend over the next 10 years than it did when it wrote the last farm bill in 2002. That’s a 25 percent increase. And contrary to what some senior lawmakers have implied, nobody has mandated any “cuts” in the sacred Title I commodity programs, which provide direct payments, protection against low prices, and other subsidies for farmers.

In fact, budget rules give the committee all the money it needs to continue these programs just as they are now, even though the current version of Title I was lambasted by editorial writers and fiscal conservatives in Congress in 2002 for being unduly generous.

It’s often hard to tell that listening to senior committee members and representatives of farm organizations. When the budget for the farm bill was being drawn up in April, Chairman Collin Peterson (D-Minn.) told reporters, “We’ve given up $60 billion in the commodity title and we’re asking for $20 billion back.. and we think we’re justified.” Since then ranking member Bob Goodlatte (R-Va.) has complained that the committee was not given a “reasonable” budget to work with.

Tom Buis, president of the National Farmers Unioin, has complained about “significantly diminished resources.” It has become a mantra—and some would say, a canard.

Neither Buis or Peterson are liars. I’ve met Peterson’s dad, a retired farmer who still shows up at 5:30 a.m. for breakfast with other old-timers at a cafe off Highway 10 in Moorhead. Dad Peterson raised his son to respect the good Minnesota virtues of honesty and straight dealing.

But the budget system gives politicians plenty of room to take liberties with reality. When Peterson talks about “giving up” $60 billion, he isn’t talking about real money, but only the projections that the Congressional Budget Office made in March about what USDA will spend on subsidies over the next 10 years if current programs continue unchanged.

Because booming demand for corn to make ethanol makes it likely prices will stay high for some time, CBO predicted in March that subsidies would fall sharply. CBO’s estimate of $80 billion in the next decade is $60 billion less than what CBO predicted would be spent going into the last farm bill.

What Peterson doesn’t say is that if prices again fall through the floor, USDA would pay out billions more than CBO is predicting now. The payments go out automatically, based on formulas, and Congress can’t control them once the programs are written into law.

The significance of this is that the ag committees could free considerable sums for new innovations by rewriting the Title 1 programs that were heavily criticized in 2002. Not doing so isn’t a result of limited resources, but of political choice.

Peterson has promised “reforms” in these programs, but has also insisted that he won’t allow any of the savings to be shifted to other areas of the farm bill, such as biofuels or conservation. In the Senate, however, committee chairman Tom Harkin (D-Iowa) said this week that he has no such rule.

“We need reforms of payment limits, and direct payments,” he said. “I don’t believe just because we’ve been doing something for 40 years that we ought to keep doing it that way.” Harkin said there may be “new commodities” that should qualify for subsidies, such as speciality crops or organic foods.

In the House, however, the insistence on protecting spending on traditional farm proglrams has created strains throughout. Some are eyeing the food stamp program as a possible source of funds for new biofuels and conservation initiatives.

CBO estimates that spending on food stamps over the next decade will grow to $565 billion—a 46 percent increase over projections made five years ago. The reason is that 7.6 million more people will be eligible. Peterson said he hoped to talk to Rep. Charles B. Rangel (D-N.Y.), chairman of the Ways and Means Committee and a passionate advocate for the food stamp program, to see if he can “find us some offsets.”

What committee leaders seldom mention is that budget rules have boosted the funding available to other, lesser known farm programs. CBO, for example, has projected that USDA will spend $66 billion over the next decade on the Section 32 program, a little known fund under the direct control of the secretary of agriculture. That is an increase of more than 50 percent over the previous five years.

Section 32 gives the secretary of agriculture almost unlimited discretion to use a portion of annual customs duties to boost farm income. Secretaries have used it to help ranchers after droughts, purchase fruits and vegetables when prices are depressed, and supply school lunch programs.

Section 32 has been described as “everybody else’s farm program,” since it benefits farmers and ranchers who aren’t covered by the traditional subsidy system. Shifting funds from Secton 32 could face political and legal challenges. But Congress writes the laws.

Since there is little will to shift money out of existing programs to finance new initiatives, farm state lawmakers are counting on being able to spend an additional $20 billion from a special “reserve fund.” The hitch is that none of that money can be spent without offsets—cuts in other programs, or tax increases.

Peterson is counting on using $5 billion of the savings in an energy bill enacted by the House earlier this year as one offset. That bill contained $14 billion in total savings from new taxes on oil company profits and offshore drillling leases. But othe committees besides Peterson’s are angling to use those savings as offsets in their bills. In any case, the “offset” could turn out to be ephemeral since the Senate has not passed the bill.

By Dan Morgan