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The Farm Bill, A Spending “Freeze,” and the Federal Debt; Jobs Agenda and Climate Change; and Crop Insurance

Farm Bill Issues

DTN Political Correspondent Jerry Hagstrom reported yesterday (link requires subscription) that, “House Agriculture Committee Chairman Collin Peterson is urging farmers to use hearings on the farm bill this year to take control of debate on farm policy reforms.

“Peterson, D-Minn., told members of the National Association of Wheat Growers and U.S. Wheat Associates on Monday that so-called reformers ‘who don’t understand how this works … defined what reform is’ in the 2007-08 farm-bill debate. Peterson said there should be changes to the farm bill, but he was scathingly critical of one of the reformers’ biggest goals, limits on payments to big farmers. The campaign to lower payment limits ‘is not reform. It’s an ideology.’

“Reformers contend that Congress can decide what size farms should get farm payments, but ‘we are not smart enough in government to decide what farm size is,’ Peterson said. ‘I am for farming that is productive, efficient and economical,’ he said.”

Mr. Hagstrom added that, “‘We need to give you a safety net that will give you back your cost of production. If you lose half your crop you need to get back 30 percent,’ Peterson told the wheat farmers. But he added, ‘It’s very hard to define cost of production. I have not been able to do that in a way that moves forward.’

“Peterson, a certified public accountant, said he favors protecting farmers on ‘whole farm income’ rather than the protection of specific crops. ‘One reason I like whole farm is we still have people cheating the system. We have people planting without any intention of harvesting a crop.’

“Peterson said the dairy industry’s interest in a new program is an indication of the prospects for change. ‘I would never have dreamt they are talking about giving up price supports for revenue insurance.’”

A Spending “Freeze” and Agriculture

Chuck Haga reported yesterday at AgWeek Online that, “A three-year freeze in spending on many domestic programs, which President Barack Obama is expected to call for when he delivers his first State of the Union message to Congress on Wednesday, likely would have little effect on commodity subsidies and other major farm programs, Rep. Collin Peterson, D-Minn., said.

“‘We expected this,’ said Peterson, who as chairman of the House Agriculture Committee plays a key role in writing the nation’s five-year farm bill.

“‘At one time, they were talking about taking a 5 percent cut’ at the U.S. Department of Agriculture, he said. ‘A freeze is better than that.’”

The article explained that, “‘It only affects discretionary spending,’ Peterson said, explaining why news of the possible freeze didn’t overly alarm him. ‘The farm bill is mandatory spending, driven by a formula, not by appropriation. What’s put in the law drives what the spending is, and direct payments, for example, are pretty much fixed.’

“‘He (Obama) can’t directly affect the mandatory spending in the farm bill, and the appropriators (in the administration) can’t change the underlying formulas I put into the law.’”

Mr. Haga added that, “Both the Obama and George W. Bush administrations tried in the past four years to make changes in some USDA mandatory programs, such as EQIP (Environmental Quality Incentives Program) and other conservation programs, Peterson said.”

“‘If there’s any exposure here with the freeze, it’s probably in conservation programs’ and possibly nutrition, rural development and other areas, ‘and not in commodities.’”

Alec MacGillis and Amy Goldstein reported in today’s Washington Post that, “But other advocates and lobbyists had less to worry about, given that their funding streams are not considered discretionary. Pat Wolff, a budget specialist with the Farm Bureau, said the organization is not worried about cuts in agriculture subsidies, since most payments to farmers are entitlements.

“‘Many farmers in this country are in crisis,’ she said. ‘It’s not the time to even be thinking about cutting back.’”

An update posted yesterday at CQPolitics.com indicated out that, “But even as he praised Obama for committing to cutting the deficit, [House Majority Leader Steny H. Hoyer] pointed out that domestic discretionary spending accounts for only about 15 percent of the federal budget. The other 85 percent consists of entitlement programs, interest on the national debt and defense-related spending.”

DTN Ag Policy Editor Chris Clayton reported yesterday that, “Like other federal departments, USDA’s discretionary spending likely would be affected by the freeze President Barack Obama proposed on Monday and will discuss in his State of the Union speech on Wednesday.

A three-year freeze in discretionary programs won’t place any new caps on farm programs, which are mandatory spending programs spelled out in the farm bill. But the spending freeze proposed by the president would cap USDA’s options for discretionary spending, which is $25.6 billion in fiscal-year 2010, or about 19.2 percent of the department’s entire budget. There are discretionary funds for every USDA agency with the largest line item, $8.24 billion, in the food and nutrition programs.

“DTN contacted USDA’s press office seeking comment on the possible impacts of a freeze on discretionary spending, but did not receive a response.”

Mr. Clayton pointed out that, “All told, USDA’s entire department budget in fiscal 2010 is $132.8 billion. USDA’s overall budget has jumped by $42.1 billion in just the last two years, largely because mandatory spending for food and nutrition programs also has risen $30 billion over those same time period as the economy has added more people to the nation’s rolls for supplemental food aid. Congress also increased eligibility for food-aid programs in the 2008 farm bill, and eligibility for food assistance was again broadened in last year’s stimulus bill that boosted USDA’s nutrition spending by $20 billion.

“USDA’s discretionary-spending authority for fiscal 2010 is about $6.2 billion less than in 2009, largely because of a $4.5 billion cut in discretionary funds for the Rural Utilities Services and a $900 million cut in discretionary funds for the U.S. Forest Service.

“The only effect on farm programs would be on the Natural Resources Conservation Service and Farm Services Agency, but it’s not clear if those programs would have received increases in 2011. NCRS is allotted $267 million of discretionary funds. FSA is allotted $1.699 billion.”

Meanwhile, James Hohmann reported yesterday at Politico that, “Senate Majority Leader Harry Reid declined to endorse the spending freeze President Barack Obama has proposed, adding that no one from the White House had briefed him on the proposal, and he’s only heard ‘bits and pieces.’”

And Walter Alarkon and J. Taylor Rushing reported yesterday at The Hill Online that, “President Barack Obama’s proposal to freeze government spending is turning out to be a tough sell on Capitol Hill.

His liberal base warned Tuesday the three-year cap on most non-defense discretionary spending could hamper an economic recovery. Conservatives dismissed it as insufficient and just for show.”

Federal Debt Issues

An update posted yesterday at CQPolitics reported that, “A proposal backed by President Obama to create a bipartisan commission to recommend ways to reduce the national debt fell short in the Senate on Tuesday.

“Although the proposal drew a 53-46 vote, the Senate had earlier agreed that it would need 60 votes to win adoption — just like other amendments it is considering this week to legislation that would raise the limit on the government’s borrowing authority.”

As the Senate rejected a commission on the federal debt yesterday, the Congressional Budget Office (CBO) released its Budget and Economic Outlook: Fiscal Years 2010-2020.

According to a CBO Blog update yesterday, “Under current law, the federal fiscal outlook beyond this year is daunting: Projected deficits average about $600 billion per year over the 2011–2020 period. As a share of GDP, deficits drop markedly in the next few years but remain high—at 6.5 percent of GDP in 2011 and 4.1 percent in 2012, the first full fiscal year after certain tax provisions originally enacted in 2001, 2003, and 2009 are scheduled to expire. Thereafter, deficits are projected to range between 2.6 percent and 3.2 percent of GDP through 2020.

“Those accumulating deficits will push federal debt held by the public to significantly higher levels. At the end of 2009, debt held by the public was $7.5 trillion, or 53 percent of GDP; by the end of 2020, debt is projected to climb to $15 trillion, or 67 percent of GDP.”

CBO Director Doug Elmendorf discussed the latest CBO budget numbers yesterday in a news conference with reporters (video replay available here); a brief audio excerpt from that presentation can be heard here (MP3-1:19).

Senate Budget Committee Chairman Kent Conrad (D-ND) also held a press briefing yesterday regarding the CBO release, as well as the Senate vote yesterday rejecting a federal commission on the debt. A replay of this press conference is available here, while a brief audio excerpt from Sen. Conrad can be heard here (MP3-2:32).

Jobs Agenda and Climate Change

As federal spending and the national debt garner increasing attention, President Obama is set to put forward the executive branch agenda in more detail in tonight’s State of the Union Address.

Shailagh Murray and Michael D. Shear reported in today’s Washington Post that, “The overriding theme of the State of the Union address, scheduled for 9 p.m. Eastern time, is the economy, aides said. White House officials said the president will describe detailed initiatives for middle-class families.”

Peter Nicholas and Christi Parsons reported in today’s Los Angeles Times that, “With his State of the Union address tonight, President Obama aims to deliver a game-changing message, one capable of convincing Americans that his policies will create jobs, curb spending and restore prosperity.”

Nonetheless, Alexander Bolton reported yesterday at The Hill Online that, “Even as he switches into his own campaign mode, Obama indicated on Monday that he is prepared to stand by his policies.

“In an interview with ABC News’ Diane Sawyer, Obama said he would ‘rather be a really good one-term president than a mediocre two-term president.’”

And Jonathan Weisman and Peter Wallsten reported in today’s Wall Street Journal that, “Even as he shifts some of his focus, White House officials say the president will continue to press hard for the ambitious agenda he laid out a year ago, much of which has encountered significant hurdles in Congress: an overhaul of health care and financial regulations, a new energy strategy that includes combating climate change, and a push for broader access to higher education, paid for by eliminating subsidies to private student lenders.”

The dual track focus of jobs and energy by the executive branch was illustrated in an update yesterday at the National Journal’s Energy and Environment Blog, where Amy Harder reported that, “President Obama’s top priorities on energy are jobs, national security and a clean environment — and in that order, EPA Administrator Lisa Jackson said today at the Washington Auto Show.”

However, some members of the legislative branch have indicated that there could be a limit to the jobs and energy linkage.

Ben Geman reported yesterday at The Hill’s Energy and Environment Blog that, “Sen. Byron Dorgan (D-N.D.) said Tuesday that jobs legislation he’s crafting with Majority Whip Richard Durbin (D-Ill.) won’t be a magnet for provisions that are contained in separate Senate energy legislation.

“The jobs bill, a work in progress, could include billions of dollars in building and manufacturing plant efficiency retrofit provisions, and some other energy-related measures as well.

But Dorgan told reporters Tuesday that the plan is ‘probably not’ going to draw from a sweeping energy bill approved by the Senate Energy and Natural Resources Committee in June.”

Additionally, in a separate update yesterday at The Hill’s Energy and Environment Blog, Mr. Geman reported that, “Sen. John Kerry (D-Mass.) said Tuesday that Democratic plans to pack billions of dollars in energy programs into upcoming jobs legislation will not sap momentum from the broader climate change and energy bill he is trying to craft.

“The jobs legislation remains in flux but could include upward of $12 billion in home and building efficiency retrofits and other energy-related spending.

“‘If it [the jobs bill] were to reach too far, it could have an impact, but I don’t think it is, and I think that has been taken into consideration,’ Kerry told reporters in the Capitol.”

In more specific developments on “cap and trade” legislation, John M. Broder and Clifford Krauss reported in today’s New York Times that, “As they watch President Obama’s ambitious health care plan crumble, the advocates of a comprehensive bill to combat global warming are turning their sights to a more modest package of climate and energy measures that they believe has a better chance of clearing Congress this year.”

The Times writers added that, “White House officials continue to insist on a broad approach to climate and energy, including a cap-and-trade system for carbon emissions that encompasses the entire economy. They are also pressing forward with Environmental Protection Agency regulation of emissions of heat-trapping gases over the virtually unanimous opposition of Republicans in the House and Senate.”

On the issue of EPA regulation and legislative efforts to stymie the ability of the executive branch to operate independently on carbon emissions, a news release issued yesterday by the American Soybean Association (ASA) stated that, “The [ASA], along with 137 other agricultural organizations including 12 state soybean affiliates, sent a letter to Senator Lisa Murkowski (R-Alaska) supporting her introduction of a resolution of disapproval regarding the decision of the U.S. Environmental Protection Agency (EPA) to move forward on regulating carbon dioxide and other greenhouse gases (GHG) under the Clean Air Act (CAA). ASA believes that EPA should not regulate GHG under the CAA, and that unilateral action by the U.S. will further erode our global competitiveness and have negligible impact on global warming.”

The release noted that, “China and India, two of the largest emitters of greenhouse gases, continue to reject any verifiable reduction measures. Without an effective international agreement on emission reductions, unilateral action by the U.S. only serves to further damage our economy and encourage businesses to relocate.”

A news update released yesterday by Senate Agriculture Chairman Blanche Lincoln (D-Arkansas) illustrated that her co-sponsorship of the “resolution of disapproval” generated a great deal of support among national farm organizations as well as numerous Arkansas agricultural groups.

Senate Agriculture Committee Ranking Member Saxby Chambliss (R-Georgia) also addressed the “resolution of disapproval” as well as broader aspects of the climate issue in an appearance yesterday on the AgriTalk Radio Program with Mike Adams.

To listen to a brief audio clip from yesterday’s AgriTalk show with Mike Adams and Sen. Chambliss, just click here (MP3-3:40).

Crop Insurance

A news release issued on Monday by the National Farmers Union stated that, “Today, the National Farmers Union (NFU), in alliance with nine other national agricultural organizations, sent a letter to United States Department of Agriculture Secretary Tom Vilsack on the draft Standard Reinsurance Agreement (SRA).

“‘The consideration of a $4 billion cut to the crop insurance program over five years on top of several substantial cuts made last year concerns both producers and businesses,’ said Roger Johnson, NFU president.

“The letter highlights the importance of prioritizing the protection of farmers’ viability, emphasizing that changes made should not negatively impact farmers and ranchers’ ability to access insurance products that are vital to their operations.”

DTN Political Correspondent Jerry Hagstrom reported yesterday (link requires subscription) that, “USDA’s proposed cut in crop insurance subsidies is too deep, said House Agriculture Committee Chairman Collin Peterson on Monday, but he thinks there are problems with the program and changes should be made.

“Peterson, D-Minn., said in a speech to the National Association of Wheat Growers and U.S. Wheat Associates that he told Agriculture Secretary Tom Vilsack last week about concerns with USDA’s proposal in the renegotiation of the standard reinsurance agreement to cut $4 billion over five years from the crop insurance program. Peterson said such cuts would cause that money to disappear from the farm bill’s baseline budget.

“Peterson suggested changes in the commission payments to agents. Under the current formula of paying crop insurance agents, commission is based on the premium to insure a crop. Thus, increases in commodity prices have raised the commission paid to an agent on average, from $500 per policy in 2004 to $1,450 in 2008. ‘You can’t defend’ that payment level, Peterson said, adding that he believes that paying agents a specific fee for each policy written may be a better system of compensation.”

Mr. Hagstrom added that, “Peterson said he believes that crop insurance may be the centerpiece of that safety net at some point in the future, saying, ‘Down the road the safety net may be primarily crop insurance. We need to cover every crop grown in this country.’”

Keith Good