August 18, 2019

Farm Bill: Funding Issues Persist- Biofuels Link

Categories: Doha / Trade /Farm Bill


Since September 2006, the market price of corn and soybeans has climbed significantly, and many agricultural observers point to the increased demand for renewable energy as a leading cause of the upward trend in prices.

Although a welcome development for some producers, recall that Congressional Budget Office projections of current programs establish the amount of money available to lawmakers for crafting agricultural policy. As projected price-triggered budgetary outlays decrease, and Congress functions under pay-as-you-go spending rules, options for adding new spending for the 2007 Farm Bill has been a persistent issue throughout this year’s farm policy debate.

“Representative Ron Kind spoke about farm policy on Wednesday. With him were representatives of public-interest groups and religious groups” (Photo and caption from The New York Times Online).

Back in February, Des Moines Register writer Jerry Perkins noted that, “High commodity prices will give authors of the next farm bill their stiffest challenge, the chairman of the House Agriculture Committee said Wednesday at the National Ethanol Conference.

“U.S. Rep. Collin Peterson, D-Minn., told the 2,000 attendees at the ethanol conference that projected spending in the 2007 farm bill would be about 45 percent less because of Congressional Budget Office projections for high corn, soybean and other crop prices.

“Those projections will guide how much money will be available for the next five-year farm bill.”

As Ralph M. Chite stated earlier this month in a Congressional Research Service publication (“Farm Bill Budget and Costs: 2002 vs. 2007”), “CBO [Congressional Budget Office] projects that total farm support (commodities, conservation, and trade) spending under current law over the next six years will be $70.9 billion, which is nearly
$22 billion less than the amount actually spent over the last six years (FY2002-FY2007). This lower estimate is driven primarily by projections for sustained high commodity prices for the foreseeable future” (page four).

(High commodity prices have also contributed to a different line of debate beyond technical budget matters. As Richard Mertens noted in Tuesday’s Christian Science Monitor, “As Congress enters the late stages of crafting a new farm bill, high prices for many commodities have made it harder than ever to defend crop subsidies that pay farmers billions of dollars a year, even in good years.”)

Budget issues continue to percolate. Earlier this week, DTN Political Correspondent Jerry Hagstrom reported (link requires subscription) that, “Agricultural lobbyists ranging from the nation’s biggest farm groups to anti-hunger advocates crowded behind House Agriculture Committee Chairman Collin Peterson, D-Minn., and ranking member Bob Goodlatte, R-Va., for a news conference Tuesday as they announced plans to bring the farm bill to the House floor Thursday.”

Mr. Hagstrom indicated that, “Peterson said he was not prepared to present the full cost of the bill, but it would be within the current baseline plus the $2.5 billion for renewable energy programs that will come from the bill that cut oil company royalties and tax breaks as well as the $4 billion offset the House Ways and Means Committee will provide for the increase in nutrition spending.

“Peterson said he would leave it to Ways and Means Committee Chairman Charles Rangel, D-N.Y., to announce the source of the $4 billion, but it was his understanding the money would not come from tax increases.”

The biofuels driven increase in commodity prices continues to create challenges to the development of the 2007 Farm Bill as budget and funding issues unfold.

Current Issues

Dan Morgan, writing in today’s Washington Post, reported that, “A huge multiyear farm bill ran into a White House veto threat and a sudden flurry of objections from Republicans yesterday on the eve of a vote on the House floor.

“Farm-state Republicans had been lining up with Democrats to defend the bipartisan bill but changed course when notified that a proposed increase in nutrition programs would be funded partly by tightening the rules on U.S.-based foreign companies that avoid U.S. taxes by using offshore havens.

“Republicans quickly picked up on a White House statement branding the funding plan as an unacceptable tax increase. Rep. Robert W. Goodlatte (Va.), the ranking Republican on the House Agriculture Committee, said that all GOP lawmakers on the panel as well as GOP leaders would oppose the bill if the funding proposal stays in.”

(For more details on the GOP perspective, see this news release from yesterday (“Ag Republicans Angered by Democrats’ Insertion of Tax Increase”), which was issued by the Ag Committee Republicans; also, the White House “Statement of Administration Policy” can be found here; and, responses by Chairman Peterson to these issues yesterday can be found here and here.)

Mr. Morgan added that, “Democrats said the tax proposal would merely close a loophole that the Bush administration itself has decried in the past. ‘Who is surprised that the administration takes the side of CEOs who hold beachside board meetings at the expense of programs to feed the least fortunate here at home?’ asked Rep. Lloyd Doggett (D-Tex.), a senior member of the Ways and Means Committee.

“The furor added a new element to an increasingly heated debate over whether the bill would provide meaningful reforms to the sprawling farm-subsidy system.”

DTN Political Correspondent Jerry Hagstrom and DTN Staff Reporter Chris Clayton provided additional analysis of the funding issue an article from yesterday (link requires subscription).

The DTN writers stated that, “The Bush administration threatened Wednesday to veto the 2007 farm bill, in part, over Democrats’ plans to pay for a $4 billion increase in the food-stamp program over five years through a tax measure Democrats said was closing a loophole, but Republicans argued was a tax increase.

“The tax issue consumed the House Rules Committee on Wednesday afternoon as the committee met to determine the ground rules for the floor debate on the farm bill. There were 110 proposed amendments to debate on the floor, but the committee was looking to limit that number. The bill and opposing amendments currently is scheduled to be debated on the floor Thursday.

“The tax dispute arose because House Agriculture Committee Chairman Collin Peterson, D-Minn., did not have enough money within the farm bill budget to pay for the food-stamp provision. Peterson convinced House Speaker Nancy Pelosi, D-Calif., and House Ways and Means Committee Chairman Charles Rangel, D-N.Y., that an increase in food-stamp benefits had such a wide public benefit that the Ways and Means Committee, which handles tax issues, should come up with the funding for it.”

Reuters writer Christopher Doering added yesterday that, “A proposal from Democratic Rep. Lloyd Doggett would help pay for nutrition and food stamps by taxing U.S. plants of companies owned by firms located overseas. Republicans charge the increase would endanger tax treaties and raise the cost of doing business in the United States.

“‘In rejecting this bill, who is surprised that the Administration takes the side of CEOs who hold beach-side board meetings at the expense of nutrition programs to feed the least fortunate here at home?’ Doggett said.”

The issue is striking concern among non-agricultural interests as well. Congressional Quarterly writer Richard Rubin noted that, “The proposal is drawing intense opposition from corporate groups that say it would discourage foreign investment and harm the economy.

“This is ‘doing something that’s going to discourage these businesses from operating in the United States,’ said Dorothy Coleman, vice president of tax and domestic economic policy at the National Association of Manufacturers. ‘I think any business is going to rethink their plans, if they’re going to be saddled with additional taxes.’”

David Rogers, writing in today’s Wall Street Journal, added that, “At issue is a tax provision valued at $7.5 billion over 10 years to help pay for improving food-stamp benefits for poor families. U.S. subsidiaries of foreign corporations would be targeted by the language, and while Democrats said their intent was only to improve tax compliance, business interests complained that legitimate multinationals would be hurt by a last-minute tax change that hasn’t been subject to hearings.

“‘This is out of left field and the repercussions are real,’ said Todd Malen, president of the Organization for International Investment, a trade group for U.S. subsidiaries of companies based abroad.

“The National Association of Manufacturers weighed in last night, and Virginia Rep. Bob Goodlatte, the ranking Republican on the House Agriculture Committee, said he would no longer support the bill. ‘It’s a lot of moving parts,’ conceded Majority Leader Steny Hoyer (D., Md.). But Democrats still hope to move ahead, as Ms. Pelosi sought to shore up liberal support by solidifying changes in nutrition programs.”

The issue could also impact the timing of the House floor debate on the Farm Bill. Congressional Quarterly writers Catharine Richert and Adrianne Kroepsch noted today that, “The conflict forced the House Rules Committee to adjourn late Wednesday night without preparing the bill for expected floor action on Thursday. The committee scheduled an 8 a.m. meeting to try again.

“Rules Chairwoman Louise M. Slaughter said the bill was ‘not yet ready,’ but ‘the Speaker’s office said it will be ready in the morning.’

“Slaughter, D-N.Y., later said that floor consideration could slip to Friday or the weekend.”

New York Times writer David M. Herszenhorn provided this backdrop to the Farm Bill debate in an article published in today’s paper; “For the many critics of farm subsidies, including President Bush and Speaker Nancy Pelosi, this seemed like the ideal year for Congress to tackle the federal payments long criticized as enriching big farm interests, violating trade agreements and neglecting small family farms.

“Many crop prices are at or near record highs. Concern over the country’s dependence on foreign oil has sent demand for corn-based ethanol soaring. European wheat fields have been battered by too much rain. And market analysts are projecting continued boom years for American farmers into the foreseeable future.

“But as the latest farm bill heads to the House floor on Thursday, farm-state lawmakers seem likely to prevail in keeping the old subsidies largely in place, drawing a veto threat on Wednesday from the White House.”

The Times article added however, that, “The keen interest in the bill, even among urban lawmakers from districts without a corn or barley field, underscores the vast scope of the farm bill, which includes not just agriculture policies but nutrition programs like food stamps, and an array of energy, land conservation and other programs.

“For instance, Democrats proposed a tax increase to pay for the part of the farm bill that would increase antihunger efforts by $4 billion.”

Concluding, the Times article stated that, “Republicans on the Agriculture Committee, who had been questioning where the money would come from, immediately began to revolt, saying they would vote against the bill.

“Other Republicans, who had no intention of supporting the farm bill, seized the chance to excoriate the Democrats on the tax increase. They included the minority leader, Representative John A. Boehner of Ohio.

“‘When you throw in the tax increase, he’d probably vote against it twice if he could,’ said a Boehner spokesman, Brian Kennedy.”

Michael Doyle, writing in today’s Sacramento Bee reported that, “A new White House veto threat and Republican anti-tax sentiment are complicating passage of a $286 billion farm bill set for House debate today.”

Later, Mr. Doyle indicated that, “‘It’s got a problem,’ said Rep. Kevin McCarthy, R-Bakersfield, also a member of the House Agriculture Committee. ‘The Dems have really messed this up.’

“McCarthy cautioned that other GOP committee members would find it ‘very difficult’ now to vote for the bill with the corporate tax measure. He suggested Democrats would do better to postpone the bill if necessary while finding a less controversial source of money.

“The Republican anti-tax coalition could find common ground with liberals who want to decrease subsidies and increase conservation spending. The current House bill, for instance, would ban subsidies to farmers with annual gross incomes greater than $1 million. The most politically charged amendment, authored by Rep. Ron Kind, D-Wis., would impose the subsidy ban at $250,000.”

Regarding Kind’s Amendment, Reuters writer Charles Abbott reported on Tuesday that, “Kind proposed cutting grain, cotton and soybean outlays by $12 billion through 2012, a 30 percent reduction from the $40 billion now projected. This, he said, will allow Congress to spend another $5.6 billon on programs like food stamps, $3 billion on land stewardship and $1.2 billion to aid fruit and vegetable farmers.”

Dan Morgan, in his article from today’s Post, added that, “His [Kind] amendment incorporates a number of administration proposals, including one aimed at ending a loophole that gives farmers unintended windfalls.

“As it works now, the government guarantees a minimum price to farmers for their grain or cotton. When prices fall below that floor, farmers can file for a payment making up the shortfall. The subsidy, known as the ‘loan deficiency payment,’ or LDP, changes daily and farmers decide when to book it. When prices rise in the months after harvest — as they generally do in corn markets of recent years — farmers can keep the payment and still sell for more. ‘It’s a double-dipping sort of thing,’ said Deputy Secretary of Agriculture Charles F. Conner. He added that the LDP provides farmers with ‘too much of a safety net.’

“In the fall of 2005, grain prices plunged temporarily because of a bumper corn harvest and transportation problems resulting from Hurricane Katrina. Thousands of farmers locked in huge LDP profits, storing their grain and selling it for much more later when prices recovered. Farmers pocketed an estimated $3.8 billion more than was needed to give them the guaranteed price.

“The Bush administration has proposed a change that would allow farmers to collect the LDP the same day they sell their crop. This would ‘prevent multi-billion dollar pay-outs’ that result from temporary price declines, yesterday’s White House statement said.

“But the change has been resisted by farm organizations and traders.”

DTN Political Correspondent Jerry Hagstrom noted yesterday (link requires subscription) that, “House Agriculture Chairman Collin Peterson, D-Minn., told agriculture lobbyists behind closed doors Tuesday that if the alternative farm bill proposed by Reps. Ron Kind, D-Wis., and Jeff Flake, R-Ariz., passes as an amendment to the 2007 farm bill during House floor consideration of the bill Thursday, he will pull the bill in favor of an extension of the 2002 farm bill.”

In additional news regarding executive branch perspective on the Farm Bill debate, Dow Jones News writer Bill Tomson reported yesterday that, “USDA’s Johanns, in a teleconference with reporters (full transcript available here), said he was pleased that House Agriculture Committee Chairman Collin Peterson, D-Minn., adopted some of the Bush administration proposals, but failed to include ‘fundamental’ reforms that need to be made in how the U.S. subsidizes farming.

“Key elements lacking in the House version of the 2007 farm bill, according to Johanns, are a meaningful limit on wealthy farmers collecting subsidies and policy to reign in loan deficiency payments that he said have proven far too expensive and provoke challenges from World Trade Organization members.”

With respect to the Senate, a news release issued yesterday by the American Farmland Trust stated that, “‘America’s farmers need a real safety net when disaster hits. But the existing subsidy programs are complicated, expensive and leave many farmers unprotected,’ says Ralph Grossi, President of American Farmland Trust (AFT). ‘AFT applauds Senators Durbin (D-IL) and Brown (D-OH) for introducing their bold, new Farm Safety Net Improvement Act. The act fundamentally transforms risk management programs to provide better protection, less market distortions and equity across crops—all at no additional costs. It is real reform that is better for producers and for the public.’

“AFT worked closely with Senators Durbin and Brown and the National Corn Growers Association (NCGA) to develop the market oriented, revenue-based protection program. ‘It’s time for a safety net that protects farmers when they need help—when they face real losses in revenue—and adjusts with the market rather than politically set target prices and loan rates,’ Grossi says. ‘The new Revenue Counter Cyclical Payment program (RCCP) will provide better protection for farmers by protecting revenue (price x yield) rather than merely price as the current system does. Now, farmers don’t receive help when they face devastating losses in revenue, when prices are high but yields are low. This will give producers help when they need it and reduce the need for ad hoc disaster assistance.’”

For more details on this proposal, just click here.

Meanwhile, in a speech yesterday, Senate Ag Committee Chairman Tom Harkin (D-Iowa) stated that, ““As you know, the House is considering its version of the farm bill this week. When you look at farm bills of the past, this is typically the order in which Congress considers the bill – the House usually goes first. In fact, the 2002 farm bill passed the House in October of 2001, with the Senate passing its bill in February 2002.

“It has been clear now for a while that there would not be room on the schedule to allow us to bring the bill to the Senate floor this month, before the August recess. I was not inclined to move in the Committee without the prospect of nearby floor time. So we are now working hard to line up our legislation, our budget numbers and the support we need to move soon after Labor Day.”

With respect to the WTO Doha round of trade talks, Reuters writer Laura MacInnis reported earlier this week that, “Trade diplomats pledged on Tuesday to make another push for a deal to open world farm markets, calling proposals meant to break a deadlock ‘a good starting point’ for negotiations resuming in September.

“‘They are all ready to work,’ New Zealand’s WTO ambassador Crawford Falconer, chairman of the World Trade Organisation agriculture talks, said after diplomats met to discuss suggestions he floated last week on subsidies and tariffs.

“Falconer said he would revise his proposals, which offer a range of possible cuts to farm market protections, after WTO negotiations begin again on Sept. 3, but declined to say how quickly countries may inch toward consensus.

“‘It takes as long as it takes,’ he told reporters.”

Keith Good

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