FarmPolicy

December 23, 2014

“Analysis from Washington”- By Dan Morgan- Speaker Pelosi

Speaker Pelosi

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.

Congresswoman Nancy Pelosi gave up her seat on the Appropriations Committee when she became Speaker of the House, but she took the panel’s legendary deal-making culture with her.

An extraordinary late-night bout of concessions to key lawmakers and groups, necessitated by an unexpected en masse defection of Republicans, rescued the farm bill.

But there could be a price to pay down the line.

Supporters of major reform of the agricultural subsidy system are the least of Pelosi’s worries.

Rep. Ron Kind’s reform proposal managed to garner only 117 votes after the bill had been loaded with funds for black farmers, the fruit and vegetable industry, food stamps, Chesapeake Bay restoration and conservation programs.

Pelosi, a closet reformer herself, voted against his amendment, but heaped praise on him after the decisive defeat. She said Kind had exercised “exceptional leadership”, and deserved credit for the fact that the bill “looks quite different than it would have without his brilliant advocacy.”

That was a subtle pitch to the reform faction to stick with the party on the final vote. Most (though not Kind) did.

The more serious threat to the handiwork of Pelosi and farm state lawmakers lies elsewhere.

For example, some on Chairman John Dingell’s Energy and Commerce Committee felt blindsided by air quality provisions in the final bill. Staffers pored through unfamiliar tomes on agricultural law after they learned late in the game that the measure contained a new provision allowing California farmers to use funds in the Environmental Quality Incentive Program to meet state and local clean air rules. EQIP has been mainly a clean water program. Air quality is firmly under the jurisdiction of Dingell, who didn’t earn his nickname “Big John” by demurring to turf raids by other committees.

The big losers in closed-door deal making that went on in Pelosi’s office until the wee hours last Thursday morning were the oil and gas industry and the crop insurance industry. Their lobbyists were caught short, but there is plenty of time for them to regroup as the bill goes to the Senate and then to a final House-Senate conference.

Both industries were hit with billions of dollars in new fees and slashed subsidies to pay for major concessions to urban liberals and the Black Caucus on nutrition programs, and settlement of discrimination claims filed by black farmers against USDA.

In the small hours, Pelosi, Congresswoman Rose DeLauro (chairwoman of the agriculture panel on House Appropriations) and Rep. James McGovern hammered out an agreement to provide $840 million for the McGovern-Dole law, which funds food for school children abroad. House Agriculture Committee Chairman Collin Peterson was not in the room, but on the phone.

To offset the costs, Pelosi agreed to further reduce the federal share of administrative costs of private crop insurance companies from 22.5 percent to 21.6 percent –saving nearly $1 billion over a decade.

No one was more surprised in the morning than Mike McLeod, a former Senate Agriculture Committee hand who now is chief counsel of the American Association of Crop Insurers. McLeod thought he had a deal to cut the payments less severely.

“The industry reluctantly supported that but we cannot support this,” said McLeod.

The industry has a bad reputation on Capitol Hill right now because of runaway profits over the last several years even as federal payments and subsidies to the industry have risen. (One amendment, which was defeated, would have cut federal payments far deeper.) But there are thousands of crop insurance agents all over the country; they are well organized; many are themselves farmers, and they will make themselves heard in coming weeks.

Pelosi had real problems, to be sure. By closing a loophole (Republicans called it a tax increase) on taxation of U.S. subsidiaries of foreign companies, Democrat leaders saved $7.5 billion over 10 years. But that left them well short of the $10.8 billion needed to update the food stamp program.

By the end of Thursday night, new fees on the oil and gas industry had been set, freeing up $6.125 billion over 10 years.

Democratic leaders agreed on new “conservation fees” on deepwater oil and gas wells in the Gulf of Mexico, and repealed royalty relief for ultra deep-water wells on the Outer Continental Shelf and Alaska. The Interior Secretary would be authorized to modiy the terms of leases in Alaska.

The final budget rejiggering got so complicated that as things now stand, the Secretary of Interior will have jurisdiction over federal payments to crop insurance companies between 2012 and 2017.

How much of this budgetary maneuvering will stand in the Senate is anybody’s guess. The top Democrat and Republican on the Senate Finance Committee, Max Baucus and Charles Grassley, are strong advocates of farm programs, but it isn’t clear whether they (and other committees of jurisdiction) will spring for the offsets engineered by Pelosi.

Meanwhile, the business community is unhappy with the action taken against U.S. subsidiaries, arguing that it would deter foreign investment and cost jobs. And the final product does nothing to move forward the Doha Round of global trade negotiations in which business has a stake.

The Business Roundtable and the U.S. Chamber of Commerce won’t be convinced to support the farm bill by improvements in the food stamp program or more money to protect fragile grasslands. They want to see cotton subsidies cut, in order to get Doha moving again.

The farm bill has a ways to go.

By Dan Morgan