Farm Bill: Spending Issues- Political Background (“Cut-Go”)
The “Washington Insider” section of DTN reported yesterday (link requires subscription) that, “One of the time-honored controversies that occupy nearly every Congress concerns the mechanism used to evaluate the future cost of proposed bills. Recently, a device called Pay-Go has been used to require, in concept, that budget experts examine each proposal and estimate the amount of spending it would require over the coming decade compared with that otherwise expected. Any increase, either from spending or revenue cuts, is required to be offset by cuts in other spending, or increases in taxes and fees.”
Yesterday’s DTN item explained that, “[C]ongressional Republicans who are preparing to take control of the House of Representatives in next year’s 112th Congress propose to bring with them new budget rules. A leader of the incoming majority’s transition team described these to the press last week.
“The mechanism is to have a new name, of course, and, for now, is being called the ‘Cut-Go’ rule — a pointed reference to what it is not, and that is the old Pay-Go rule. The new approach will be proposed formally when Congress reconvenes in January, according to Rep. Rob Bishop, R-Utah, who is leading a subgroup of the Republican transition team.
“Under Cut-Go, lawmakers must pay for new spending programs by eliminating an existing one of equal or greater value, Bishop said. While it is similar to the Pay-Go rules in some ways, it will not allow spending increases to be offset with new taxes or fees. Also, tax cuts are not to be considered spending, and will not have to be offset with spending reductions.”
The update added that, “Clearly, the new majority intends to cut federal spending, and is serious about shaping the institution as necessary to achieve that goal. With regard to farm programs, for example, observers expect Congress to push hard to cut USDA’s budget, even though many are skeptical whether there will really be big cuts in the agricultural safety net.”
Rep. K. Michael Conaway, (R-TX), the incoming Chairman of the House General Farm Commodities and Risk Management Subcommittee, indicated in a news release yesterday that, “Today, the House Office of Majority Transition released the new House rules for the 112th Congress. Included in the rules is Rep. Mike Conaway’s (TX-11) language to ‘Cut-as-you-go’, previously introduced as the ‘No New Programs’ legislation, which requires cutting spending in existing programs for any increases in mandatory programs of equal or greater cost.”
“The ‘Cut-as-you-go’ language states that tax increases cannot be used to pay for new mandatory spending. This rule will, in practice, replace the Democrats’ ‘pay-go’ rule.
Farm Bill: Costs and Policy Issues
A recent Congressional Research Report (CRS) report (“Actual Farm Bill Spending and Cost Estimates,” by Jim Monke and Renée Johnson, Dec. 13), noted at page one that, “Similar to the conditions during debate on the 2008 farm bill, the upcoming farm bill debate is likely to be driven in part by relatively large budget deficits and growing demands for fiscal constraint. In fact, many observers believe that budget reconciliation might be necessary before the 2008 farm bill expires in 2012. Both chambers already held hearings in 2010 to hear how the 2008 law is working and what changes they want in the next bill [Note: House Hearings Summary available here-Senate Hearings Summary available here]. The Fiscal Commission and the Obama Administration, among others, already have submitted budget proposals to reduce farm supports, an approach that is at odds with many farm sector advocates who support the status quo.”
At page five, the CRS report indicated that, “Compared to the 2002 farm bill, the 2008 farm bill is projected to spend less on traditional commodity programs and provide greater spending for other major farm programs, such as farm conservation, farm-based renewable energy programs, and agricultural export programs.”
The report added that, “The budget situation may be more difficult than in past farm bills because of growing federal budget deficits and new pay-as-you-go budget rules enacted in 2010. Consequently, even a ‘simple’ extension of the existing farm bill may be difficult. While some programs (like most of the farm subsidies and nutrition assistance) have assumed future funding, others do not (mostly newer programs). Specifically, 37 programs across 12 titles of the 2008 farm bill do not have funding beyond 2012 and could cost about $10 billion (over five years) to renew. This is about 10% of the $100 billion five-year cost of the 2008 farm bill if the nutrition title is excluded.
“At the same time, broad deficit reduction proposals are specifically targeting agricultural subsidies” (at page eight).
Meanwhile, a commentary item from the California Farm Bureau recently stated that, “As a California farmer, you may think that the federal farm bill doesn’t impact you and your operation. While it is true that farm bill programs have historically been directed to Midwestern farmers for commodities such as corn and soybeans, a policy shift is under way that reflects the diversity of agriculture here in the Golden State.
“Through the leadership of a unified industry and Central Valley congressmen, the 2008 Farm Bill includes provisions for California farmers, most notably through an expansion of conservation programs and creation of a new specialty crops title. California farmers now utilize farm bill initiatives for improved trade access, technical assistance, research, and pest and disease exclusion.”
The California Farm Bureau item added that, “Advocacy groups focused on environmental, health and taxpayer issues have become very vocal in their objection to traditional farm program payments, as well as to a number of ethanol and energy programs. These groups believe the current farm bill is not a fair distribution of taxpayer dollars, does not provide enough emphasis on fruits and vegetables that are important in addressing health and nutrition concerns, and should provide more funding for conservation programs that produce a public benefit.”
In related developments with Farm Bill implications, Rep. Jim McGovern (D-Mass.) addressed the continuing issue of hunger briefly on the House floor yesterday.
Rep. McGovern noted that, “M. Speaker, as we near the end of 2010 and the 111th Congress, I want to take a few minutes to talk about an issue that is critically important to the health and well being of our country. It is also an issue that I care deeply about. That issue, M. Speaker, is hunger.” A transcript and video replay of Rep. McGovern’s remarks are available here.
Philip Brasher reported yesterday at the Green Fields Blog (Des Moines Register Online) that, “An Iowa lawmaker who has a say in funding the Food and Drug Administration predicts there will be little if any money for the increased spending and staff authorized by a sweeping new food safety bill. ‘We simply don’t have the money to pay for it,’ Republican Rep. Tom Latham said in an interview. He voted against the bill yesterday, as did every other Republican on the House agricultural appropriations subcommittee that controls the budget of the FDA.”
Ian Berry reported in today’s Wall Street Journal that, “Corn futures set a fresh 29-month high Wednesday as dry Argentina weather increased concerns over global supplies for next year.
“Corn for March delivery settled 6.75 cents, or 1.1%, higher at $6.09 a bushel at the Chicago Board of Trade. It is the highest settlement since July 2008, when prices were retreating from record highs of near $8 a bushel.”
The Journal article added that, “The U.S. crop is raising concerns as well as traders and analysts try to gauge whether enough corn will be planted next year to keep pace with global demand. While analysts widely expect farmers to increase their plantings from 2010 because of strong prices, other crops, including soybeans and cotton, also enjoy robust prices, giving farmers other attractive options.”
Wall Street Journal writer Kelly Evans reported earlier this week that, “2011 is shaping up as the year of the food fight.
“In one corner of the ring: companies desperate to pass along higher food and commodity prices to consumers, and ease up on profit-killing discounts. In the other: consumers with a questionable ability to absorb them.”
Bloomberg writer Jake Lloyd-Smith reported yesterday that, “Farm-commodity prices including corn will extend rallies next year driven by increased demand from emerging markets including China, the world’s most populous nation, and higher energy costs, according to Rabobank Groep NV.
“There was ‘rampant demand’ for agricultural commodities from China, and rising corn prices may drive gains in other grains, according to a report yesterday from analysts at the bank. Surging crude-oil costs, low global food stockpiles and a weakening dollar may also bolster prices, the report said.
“Rabobank’s predictions add to forecasts that food costs may surge next year, potentially raising inflation and paving the way for a reprisal of the bull market in 2008, when prices surged to records. Increased Chinese purchasing of global crops is ‘reshaping’ some farm commodity markets, the report said.”
Reuters news reported yesterday that, “Global grain supplies remain tight this and next crop season despite better-than-expected world cereals output because demand has also risen, the United Nations’ Food and Agriculture Organisation said on Wednesday.”
The Reuters article noted that, “The FAO said tightening of the cereal market in the 2010/11 crop year had already led to a sharp rise in world prices of all major cereals in recent months, with wheat and coarse grains trading at around 50 per cent above the previous year’s levels.
“‘The corn market remains tight and it is going to be quite a market driver into the spring, pulling prices of wheat and other crops as well,’ [FAO’s economist Abdolreza Abbasssian] said.
Meanwhile, a recent news release from University of Missouri Extension stated that, “Dairy producers face a cost-price squeeze for the first half of 2011, University of Missouri dairy economists report.
“Milk prices are expected to average only $15.75 per hundredweight, down from $18 in the last quarter of 2010. That decline hits at a time of rising feed costs.
“‘The combination of low-price milk and high-cost feed makes for break-even margins at best,’ said Scott Brown of the MU Food and Agricultural Policy Research Institute (FAPRI). ‘This hurts chances for producers to rebuild equity lost from mid-2008 through 2009.’”
And Bloomberg writer Elizabeth Campbell reported yesterday that, “Torrential rains drenching California are threatening strawberry crops and delaying some vegetable planting, state agriculture officials said.”
Bloomberg writer Karen Gullo reported yesterday that, “Genetically modified sugar beet plants that would produce seeds for the 2012 planting season can’t yet be destroyed as ordered by a judge, a federal appeals court in San Francisco ruled.
“The U.S. Court of Appeals put on hold until Feb. 28 a judge’s Nov. 30 order to dig up 256 acres of sugar beet seedlings, or until it issues an order, whichever is first, according to a ruling yesterday. Environmental groups sued the U.S. Department of Agriculture to block planting permits given four companies for beets that were modified to withstand Monsanto Co.’s Roundup herbicide.”
The Bloomberg article stated that, “The appeals court on Dec. 6 put a temporary hold on U.S. District Judge Jeffrey White’s Nov. 30 order, which the government is appealing.”
Ben Lefebvre reported recently at The Wall Street Journal Online that, “Several major U.S. oil refiners said Tuesday that they won’t sell gasoline containing 15% ethanol despite recent government authorization for fuel makers to start distributing the fuel blend.
“Valero Energy Corp., Marathon Oil Corp. and Tesoro Corp. said they would refuse to sell E15, a mix of 85% gasoline and 15% ethanol, at their gas stations, because it could harm older automobiles or void their warranties. They and most other refiners now sell a mix of 10% ethanol and 90% gasoline.”
Ken Anderson reported yesterday at Brownfield that, “The Food and Drug Administration is trying to get pharmaceutical companies to voluntarily stop providing antibiotics to promote livestock growth.
“The Des Moines Register reports that FDA, in a recent meeting with consumer groups, indicated it is negotiating with one company to remove growth promotion as a labeled use for one of its antibiotics. FDA officials told the consumer advocates that they prefer a voluntary approach over the lengthy legal process of restricting the drugs’ use.”
In a separate item posted yesterday at Brownfield, Ken Anderson reported that, “The National Cattlemen’s Beef Association is expressing its opposition to the nomination of a federal judge, claiming she has ties to animal activists. And a coalition of several other farm groups is also expressing concern with the nomination.
“Judge Benita Pearson has been nominated to the U.S. District Court for the Northern District of Ohio. The nomination is currently being considered by Congress. But NCBA says Pearson’s membership and participation in an animal rights group called the Animal Legal Defense Fund (ALDF) would make it difficult for her to be an impartial judge in cases regarding actions by animal rights activists. ALDF is an organization that advocates giving animals the same legal rights as humans.”
This issue was also discussed on yesterday’s AgriTalk Radio program, where John Herath spoke with a representative from NCBA about this development. The NCBA spokesperson indicated that the Senate 56-39 confirmed Judge Pearson earlier this week.
To listen to a brief portion of this conversation from yesterday’s AgriTalk program, just click here (MP3- 2:08).
Robin Bravender reported earlier this week at Politico that, “The Obama administration is expected to roll out a major greenhouse gas policy for power plants and refineries as soon as Wednesday, signaling it won’t back off its push to fight climate change in the face of mounting opposition on Capitol Hill.”
Ana Campoy and Stephen Power reported in today’s Wall Street Journal that, “The Obama administration is planning to accelerate new greenhouse-gas regulations for power plants and oil refineries amid stiff opposition from industry and congressional Republicans.
“The administration is also escalating a clash with Texas Gov. Rick Perry, who has refused to sign on to its climate agenda.
“The Environmental Protection Agency is expected to announce Thursday that it will propose standards for controlling greenhouse-gas emissions from U.S. power plants by July 2011 and for refineries by December 2011.”
The Journal article noted that, “The EPA’s effort to regulate greenhouse-gas emissions ‘paints a big target on the backs of Texas agriculture and energy producers and the hundreds of thousands of Texans they employ,’ said Katherine Cesinger, a spokeswoman for Gov. Perry.”
In related news, Andrew Restuccia reported yesterday at The Hill’s Energy Blog that, “President Obama said Wednesday that he plans to ‘immediately engage with Republicans’ next year in an attempt to pass an energy bill.
“But speaking at a press conference Wednesday, Obama also said he still needs to ‘figure out’ how to deal with energy issues.
“The future of energy policy in the next session of Congress is very much in flux. But, facing a Republican majority in the House and more Republicans in the Senate, Obama has indicated he is willing to compromise. Following the November midterm elections, Obama specifically mentioned nuclear energy and natural gas as potential areas of compromise.”
The Hill update added that, “The senators involved in the failed attempt to broker a compromise on climate change earlier this year — John Kerry (D-Mass.), Joe Lieberman (I-Conn.) and Lindsey Graham (R-S.C.) — have all expressed interest in working on energy issues next year. And Sens. Jeff Bingaman (D-N.M.) and Lisa Murkowski (R-Alaska), the chairman and ranking Republican on the Senate Energy and Natural Resources Committee, respectively, hope to revive parts of the energy bill that passed their panel in 2009.”