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Debt Commission; Farm Bill; Biofuels; Climate; Trade; GIPSA; and CFTC Issues

Debt Commission

John D. McKinnon, Corey Boles and Martin Vaughan reported today at The Wall Street Journal Online that, “The leaders of a White House commission laid out a sweeping proposal to cut the federal budget deficit by hundreds of billions a year by targeting sacrosanct areas of U.S. tax and spending policy, such as Social Security benefits, middle-class tax breaks and defense spending.”

The Journal article noted that, “Overall, the plan would hold down the growth of the federal debt by roughly $3.8 trillion by 2020, or about half of the $7.7 trillion by which the debt would have otherwise grown by that year, according to commission staff. The current national debt is about $13.7 trillion.”

Jackie Calmes reported in today’s New York Times that, “Liberal groups immediately condemned the plan when news of it broke, for its Social Security and Medicare changes and for the scope of the spending cuts. The House speaker, Nancy Pelosi, in a statement called it ‘simply unacceptable.’

“The furor on the left was not matched — yet — by a similar outcry from the right to the draft’s proposed revenue increases, cuts to the military or other options.”

The Times article added that, “Cuts in annual discretionary spending, domestic and military, would be the largest in recent decades. Farm subsidies would be reduced.”

Lori Montgomery reported in today’s Washington Post that, “Entitlement programs would not go untouched. Step four calls for cutting farm subsidies by $3 billion a year…

More specifically, Chris Clayton reported yesterday at the DTN Ag Policy Blog that, “Among the cuts to mandatory programs [see Co-Chair’s Proposal], commission proposes reducing direct payments $22 billion by 2020.

“‘Reduce farm subsidies by $3 billion per year by reducing direct payments and other subsidies, Conservation Security Program funding and funding for the Market Access Program’ [at page 37 of the Co-Chair’s Proposal].

“With Republicans coming into control of Congress, it will be worth watching to see how much of the commission’s proposal will be taken up in the push to cut federal spending.”

Mr. Clayton added that, “The commission also finds $900 million a year in savings by requiring food-processing facility to finance food-safety and inspection services. Increased fees are often resisted by packers, but the commission states that all federal inspection of meat and poultry products should be paid for with fees, thereby making the service by those that use it.

The commission also proposed $200 billion in federal-budget discretionary spending cuts, including eliminating a number of programs in the Rural Utility Service, saving $500 million by 2015. The report states that the agency, which administers loans, loan guarantees and grains for water, waste-water, telephone and electricity, has increased its focus to broadband. ‘However, the agency also runs a number of programs which are outdated, overlapping, and which provide limited or questionable public policy benefits. These include the Local Television Loan Program among others.’

“A key proposal would also be to eliminate all earmarks, saving $16 billion a year by 2015.”

A White House statement from yesterday indicated that, “The President will wait until the bipartisan fiscal commission finishes its work before commenting.”

Sen. Kent Conrad (D-ND) indicated yesterday that, “I commend them for putting together a serious proposal. It reveals just how difficult it is to put the nation on a sound fiscal course. Some of it I agree with; some I strongly disagree with.”

The New York Times editorial board opined today that, “The draft proposal by the chairmen of President Obama’s deficit-reduction commission was a welcome antidote to the low-minded debate that dominated the midterm elections, in which politicians all vowed to reduce the deficit but offered no credible plans.”

And The Washington Post editorial board stated that, “But what is particularly valuable about their blueprint is how it lays out in chastening detail precisely how deep and widespread the pain will have to be to get the nation’s finances on a sustainable path.”

Farm Bill Issues

The CQ Roll Call Daily Email Briefing from yesterday by David Hawkings reported that, “The top Democratic seat on the [House] Budget Committee will be Chris Van Hollen’s consolation prize for racking up a 1-1 record running his party’s campaign organization these past four years. The Maryland lawmaker’s decision effectively boxes out two who wanted to succeed the defeated John Spratt in that job: Allyson Schwartz of Pennsylvania and Bobby Scott of Virginia.

Kent Conrad of North Dakota probably will be Van Hollen’s partner in leading the party’s congressional cover for Obama’s fiscal policies, and maybe working on an overhaul of the broken federal budget process. Conrad is likely to keep the top Democratic seat on Senate Budget — which he’s had for a decade — rather than claim the ranking spot on Agriculture. His reasoning: He was able to drive the Senate version of the last farm bill from his Budget seat and can easily do so again. (The next farm bill is supposed to be done in 2012.)

Meanwhile, the “Washington Insider” section of DTN reported yesterday (link requires subscription) that, “One way the incoming Republican majority may choose to streamline operations in the House is to cut the number of members assigned to various committees. Right now, several committees have more than 60 members, with the Transportation and Infrastructure panel topping them all with 75 members, or just over 17 percent of the entire House.

Whether a potential shift to smaller committees would hit the Agriculture panel won’t be known until Republicans set the rules that will govern the House in the 112th Congress. Currently, there are 46 members of the House Agriculture Committee, divided between 28 Democrats and 18 Republicans. According to Rep. Greg Walden, R-Ore., who is serving as his party’s transition chairman, ‘If you are ever going to have a discussion about the size of committees, … this is the time, when there are a lot of vacancies.’ And, he added, ‘It’s pretty hard otherwise to kick people off.’”

An update posted earlier this week at Farm Futures Online reported that, “[House Ag Committee Chairman Collin Peterson (D-Minn.)] says it is unrealistic to believe the Farm Bill will be passed in an election year, which will be the case in 2012. He adds that incoming Speaker John Boehner, R-Ohio, is opposed to farm programs and [Rep. Frank Lucas (R-OK)] may be asked to eliminate farm programs.

“‘Boehner left me alone in the 2008 bill even though he was opposed to it, and I’m forever grateful for that’ Peterson said. ‘He’s a good friend of mine and I can work with him even though we don’t agree on some of this stuff. He may be pushed and not have any choice because of his caucus to weigh in to try to do something like Freedom to Farm where they are going to phase out subsidies again.’”

One potential factor that could influence political calculations with respect to spending cuts is whether or not some new GOP lawmakers plan to have an extended tenure in Washington.

Alex Isenstadt reported yesterday at Politico that, “When the massive Republican class of 2010 is sworn into office and officially delivers the House majority to the GOP, Democrats can take consolation in this fact: Roughly half of the new freshmen say they won’t remain in Washington for long.

“In what appears to be a breath of life for the moribund term limits movement, roughly half of the 80-plus Republican House freshmen — and a handful of the newly elected GOP senators — have promised to limit their congressional tenures, with some even promising support for new term limits legislation.”

To many of the new members, term limits are a key component of their reform-oriented approach to Congress,” the Politico article said.

In other Farm Bill related news, Robert Koenig reported earlier this week at the St. Louis Beacon Online that, “When newly elected U.S. House members gather in Washington next week for freshman orientation, a curious capital will get its first glimpse of Missouri’s Vicky Hartzlerthe farmer, small business owner, author, teacher and former state legislator who toppled the powerful chairman of the House Armed Services Committee.”

“To be sure, economics — reducing taxes, slashing federal spending and promoting business and agriculture — dominates Hartzler’s initial priority list,” the article said.

Mr. Koenig added that, “The congresswoman-elect would exempt some of the federal budget’s high-cost categories — including Social Security, Medicare and the Pentagon budget — from cutbacks. But she would not exempt agricultural subsidies, another major area of federal spending popular in rural areas such as west-central Missouri’s Fourth District. Among the many farms to receive such subsidies is the 1,700-acre Hartzler farm, which — according to the Environmental Working Group’s ‘Farm Subsidy Database’ — received about $774,000 in federal payments (mainly commodity subsidies for corn, soybeans and wheat) from 1995 through 2009.

“‘Everything should be on the table,’ she says. While she says some agriculture programs represent a ‘national defense issue’ because they help guarantee that ‘we have a safety net to make sure we have food security in our country,’ Hartzler adds: ‘Should we continue the CRP [Conservation Reserve] program, where you pay farmers to not plant ground and set it aside for awhile? I’m not sure. The time for that may be over.’”

In other news, Joe Garofoli reported today at the San Francisco Chronicle Online that, “A similar surge was happening Wednesday in the Central Valley’s 20th Congressional District, where incumbent [House Ag Comm Member] Rep. Jim Costa, D-Hanford (Kings County), trailed Fresno farmer and first-time candidate Andy Vidak by 27 votes on election night.

But an updated count Wednesday gave Costa a 1,200-vote lead, his campaign said, and he declared victory: ‘I believe our 1,200-vote margin will not only stand up but will increase as the remaining few ballots are counted,’ Costa said.”

Biofuels

A news release yesterday from Sen. Tom Harkin (D-Iowa) stated that, “[Sen. Harkin] led a bipartisan group of Senators in calling on Senate Majority Leader Harry Reid to include provisions aimed at expanding biofuels markets in energy legislation pending in the Senate. Additionally, the Senators asked that Leader Reid consider legislation to extend the Volumetric Ethanol Excise Tax Credit (VEECT) beyond its current expiration date of December 31, 2010. In the letter, the Senators point out that these steps are crucial to reducing the nation’s dependence of foreign petroleum, creating jobs in the United States and addressing the issue of climate change. It is estimated that the enactment of these policies will enable as much as a 5-fold increase in biofuels’ displacement of oil-based fuel use in transportation within the next two decades. Joining Harkin in signing the letter were Senators Christopher Bond (R-MO), Tim Johnson (D-SD) and Amy Klobuchar (D-MN). A copy of the letter can be found here.”

However, Timothy P. Carney indicated last week at the Washington Examiner Online that, “Republicans talk about ending wasteful government intervention. Congressional Democrats say they want to protect the environment. And Barack Obama claims he’s looking for bipartisan cooperation and reform. All of these goals would be served by rolling back ethanol subsidies.”

The article stated that, “So ethanol becomes a good test for the supposedly reborn Republican Party in both the lame-duck and the 112th Congress. Republicans this year could demand a six-month extension of current policy, and next year, with control of the House, simply kill the tariff and tax credit.”

Climate Issues

Stephen Power reported today at The Wall Street Journal Online that, “The Obama administration is moving to give states broad leeway to decide how best to limit emissions of heat-trapping gases from factories, refineries and other industrial facilities.

“The Environmental Protection Agency’s guidance to states Wednesday appears aimed at allaying businesses’ fears of a heavy-handed, Washington-dominated approach to greenhouse-gas regulation. But business groups and some lawmakers said the vagueness of the agency’s directive would invite differing interpretations and prolong companies’ uncertainty over what they must do to comply with the law. Environmental groups largely cheered the EPA’s step.

“The agency’s action comes as major business groups and lawmakers from states heavily dependent on smokestack industries are ratcheting up attacks on the EPA, saying its effort to regulate emissions of carbon dioxide and other greenhouse gases will lead to costly permit requirements and delays in construction of new facilities. The EPA says science and the law compel it to act, and that the agency can design regulations that don’t unduly burden the economy.”

Meanwhile, the AP reported yesterday that, “The United States and China, which have clashed repeatedly at U.N. climate talks, are moving closer toward a limited agreement at a major global warming conference next month, the top U.N. official on climate change said Wednesday.

“‘Everything I see tells me that there is a deal to be done’ when delegates from most of the world’s nations convene Nov. 29-Dec. 10 in the Mexican resort of Cancun, said Christiana Figueres, head of the U.N. climate change secretariat.”

Trade

Reuters news reported yesterday that, “A Republican lawmaker urged South Korea on Wednesday to make more concessions on beef and automobiles in high-stakes trade talks this week with the United States, as a U.S. business leader said issues must be settled fast to get a deal.

“Representative Peter Roskam [R-Illinois] told reporters in a call from Seoul that further movement by South Korea on those two issues would ‘help enormously’ in winning U.S. congressional approval of the trade deal next year.”

The article added that, “Roskam said South Korea had made significant progress in reopening its market to U.S. beef exports but urged it to remove remaining barriers.”

Evan Ramstad and Jonathan Weisman reported in today’s Wall Street Journal that, “Negotiations between the U.S. and South Korea to revive a stalled free-trade deal still faced significant hurdles early Thursday as the countries neared a deadline imposed by U.S. President Barack Obama, who is hoping to use the pact to jump-start his trade policy.

“Trade negotiators from the two countries have been working all week to resolve the disputes before a meeting scheduled for Thursday afternoon between Mr. Obama and South Korean President Lee Myung-bak.

“But shortly before that meeting, White House officials cautioned that the talks remained stuck on what U.S. negotiators see as unfair environmental standards designed to keep American automobiles out of South Korea.”

GIPSA

DTN Ag Policy Editor Chris Clayton reported yesterday (link requires subscription) that, “Both sides [livestock producers who support or oppose the USDA’s proposed marketing rule] are convinced the Grain Inspection, Packers & Stockyards Administration’s so-called ‘GIPSA rule’ will affect their bottom lines. And on Thursday in downtown Kansas City, with a plethora of reporters from the National Association of Farm Broadcasting group on-hand, the opposing sides held back-to-back news conferences in adjacent hotel conference rooms.

Roger Johnson, president of the National Farmers Union, said in the pro-GIPSA briefing that farmers are constantly receiving a smaller share of the meat dollar, while packers and retailers receive more. Johnson added there is something wrong with a system in which packers can force a producer to sign a marketing contract without allowing the producer to have the contract reviewed by an attorney. That’s an example of onerous market power, he said, that would be fixed under the proposed rule.”

The DTN article added that, “Groups opposed to the rule — the National Cattlemen’s Beef Association, National Pork Producers Council and National Meat Association — released a study by Informa Economics on Wednesday that estimated the proposed rule would lead to about 23,000 job losses and an annual gross domestic product loss of $1.5 billion. The analysis states packers would reduce premium options for producers to avoid potential legal liability.”

CFTC Issues

The USDA’s Economic Research Service (ERS) released a report yesterday titled, “The Dodd-Frank Wall Street Reform and Consumer Protection Act: Changes to the Regulation of Derivatives and their Impact on Agribusiness.”

An ERS summary of the report stated that, “The Dodd-Frank Wall Street Reform and Consumer Protection Act makes significant changes to Federal regulation of the U.S. over-the-counter (OTC) derivatives market, with the goals of improving market transparency and reducing systemic default risk. This article reviews some important features of the new law and discusses their potential impact on agribusiness, much of which will depend on how the rules are written and implemented by regulators.”

For more background on this issue, see this FarmPolicy.com interview with House Ag Committee Chairman Collin Peterson from this summer.

Keith Good