FarmPolicy

August 21, 2019

Budget Issues Impacting Farm Policy; Farm Bill; and Trade

Budget Issues: Continuing Resolution (CR)- Political Background

David Rogers reported yesterday at Politico that, “A stop-gap spending bill to keep the government operating through Mar. 18 advanced steadily in Congress on Tuesday after Republicans rejected a late bid by President Barack Obama to stretch out the extension to 30 days and even double the promised savings to placate GOP conservatives.

“House passage came on a 335-91 vote and Senate Democrats promised to follow suit quickly to avert any threat of a shutdown this Friday.”

The Politico article explained that, “Indeed, both congressional Democrats and the administration are convinced that no agreement is likely in the space of time allowed, and Republicans have set a tactical trap, forcing the Senate up against another shutdown deadline in two weeks and thereby giving the House more leverage to insist on its position.

“Since the House initiates appropriations bills, it begins with this advantage, which helps Speaker John Boehner (R-Ohio) keep the pressure not just on [Senate Majority Leader Harry Reid (D-NV)] but also on Obama. The $60 billion-plus package of spending cuts approved by the House on Feb. 19 arrived in the Senate only after it was already on its Presidents Day Recess, and now Reid must try to get a Senate bill across the floor and into conference in two weeks.

“This would be difficult in normal circumstances but the current situation gives immense leverage to Minority Leader Mitch McConnell (R-Ky.) to slow the Senate Democratic bill and then press for passage of the House version as a last alternative before the new March 18 shutdown deadline. ‘I liked what the House did,’ McConnell told reporters Tuesday.”

Carl Hulse reported in today’s New York Times that, “By keeping the time frame tightly limited, Republicans in the House and Senate can try to keep the pressure on Democrats to accept the $61 billion in cuts approved by the House last month. But one senior Senate Republican official predicted Tuesday that at least one more temporary budget bill was in the cards before any final agreement.”

Budget Issues: Continuing Resolution- Agriculture

More specifically with respect to agriculture and the CR, an update posted yesterday at the National Sustainable Agriculture (NSAC) Blog stated that, “Only one USDA program—the Broadband Direct Loan Subsidy—is cut in the two-week extension.

“Funding for this program would be reduced by $29 million. Click here for a complete breakdown of the $4 billion in cuts.”

A separate update posted yesterday at the NSAC Blog indicated that, “154 grassroots organizations sent a letter to the United States Senate on Monday in opposition to a government funding bill that would slash more than $60 billion from the federal budget for the last half of fiscal year 2011. The National Sustainable Agriculture Coalition (NSAC) circulated the letter, and the Rural Coalition/Coalición Rural circulated it as well.”

Meanwhile, a joint news release yesterday from NSAC and the Environmental Defense Fund stated that, “Thirty-five agriculture and conservation groups today sent a letter to the U.S. Senate, urging senators to reject disproportionately high cuts to agriculture conservation programs in the House-passed appropriations bill for Fiscal Year 2011 (H.R. 1). H.R. 1 would cut USDA and FDA discretionary spending–including critical funding for conservation technical assistance for farmers, ranchers and foresters–by 22 percent, more than 50 percent higher than the non-defense average cut of 14 percent.

“‘We understand the critical need to right America’s fiscal ship, but…rural America’s contribution to deficit reduction should not be larger than other sectors, and…conservation’s contribution should likewise be proportional,’ said the letter by the 35 groups, including Environmental Defense Fund, National Farmers Union and National Sustainable Agriculture Coalition. ‘Unfortunately, the House-passed FY2011 appropriations bill, H.R. 1, not only far overshoots reasonable reduction levels, but also singles out funding for agriculture and rural America for a disproportionately high cut. These conservation programs are crucial to the health and viability of agriculture and rural America.’”

Budget Issues: GAO Report- Nutrition, Ethanol and Direct Payments Noted

Damian Paletta reported in today’s Wall Street Journal that, “House and Senate leaders of both parties promised to rein in government spending after examining a new report that detailed billions of dollars in duplicative federal programs.

“The 345-page report from the nonpartisan Government Accountability Office said there were dozens of overlapping programs in areas like defense, transportation and education that could be consolidated to save taxpayers money.”

Today’s Journal article noted that, “The GAO report highlighted areas where multiple federal agencies either perform very similar duties or have nearly identical programs. The report said there were 18 different food- and nutrition-assistance programs…”

Domestic food assistance programs were highlighted in detail on pages 125-128 of the GAO report; at page 126 the GAO report stated that: “Moreover, not enough is known about the effectiveness of many of these programs. Research suggests that participation in 7 of the 18 programs— including the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC), the National School Lunch Program, the School Breakfast Program, and SNAP [food stamps]—is associated with positive health and nutrition outcomes consistent with programs’ goals, such as raising the level of nutrition among low-income households, safeguarding the health and well-being of the nation’s children, and strengthening the agricultural economy. Yet little is known about the effectiveness of the remaining 11 programs because they have not been well studied. As part of its broader recommendation GAO suggested that USDA consider which of the lesser- studied programs need further research, and USDA agreed to consider the value of examining potential inefficiencies and overlap among smaller programs.”

Reuters writer Charles Abbott reported yesterday that, “Reform of U.S. ethanol incentives could save up to $5.7 billion a year, a congressional watchdog said on Tuesday as ethanol critics called on Congress to let the tax breaks expire at the end of this year.

“In an examination of federal spending, the Government Accountability Office said the ethanol tax credit and a federal law requiring use of biofuels ‘can be duplicative … and can result in substantial loss of revenue.’

“The tax credit will cost $5.7 billion this year and $6.75 billion in 2015 when corn-based ethanol is assured a 15 billion-gallon share of the motor fuel market. The GAO listed options ranging from keeping the credit, ending it or converting it to a variable credit keyed to crude oil prices.”

Issues regarding domestic ethanol production were discussed in more detail on pages 59-61 of yesterday’s GAO report.

Philip Brasher pointed out yesterday at The Green Fields Blog (Des Moines Register) that, “A coalition of groups representing the food industry, environmentalists and others sent a letter today to congressional leaders urging them to end the ethanol subsidy. ‘At a time of spiraling deficits, we do not believe Congress should continue subsidizing gasoline refiners for something that they are already required to do’ by the annual mandates, the groups said.”

Yesterday’s GAO report also included a section titled, “Reducing Some Farm Program Payments Could Result in Substantial Savings,” which began on page 159.

In part, the report stated that, “Between 2005 and 2009, the U.S. Department of Agriculture (USDA) spent an average of about $15 billion annually on programs to support farm income, assist farmers after disasters, and conserve natural resources. Under one of these federal farm programs, USDA provides fixed annual payments—called direct payments—to farmers based on a farm’s history of crop production. Direct payments were most recently reauthorized in the Food, Conservation, and Energy Act of 2008, which will expire in 2012 without future action.

GAO has shown that taxpayer dollars can be saved with strengthened oversight of farm program payments, including direct payments. For example, GAO reported in October 2008 that USDA provided farm program payments to thousands of individuals with incomes exceeding income eligibility caps. GAO has also shown that USDA’s oversight and enforcement of program rules is not always effective. For example, in July 2007, GAO reported that USDA paid $1.1 billion in such payments to more than 170,000 deceased individuals, and in April 2004 GAO reported that USDA provided such payments to people who may have had only limited involvement in farming because the agency lacks sufficient management controls. Since then, USDA has taken some actions in response to GAO’s recommendations.”

With respect to the July ’07 report, (report available here, related news article here, and updated FSA rule, “Prevention of Payments to Deceased Persons”) an AP article from January 26 of this year reported that, “A 2007 report that the federal government had paid $1.1 billion in subsidies to dead farmers sparked an outcry and has been frequently cited by critics who considered the payments a blatant example of wasteful spending. But a follow-up that found no fraud and determined nearly all the subsidies paid on behalf of dead farmers in recent years were proper has received little attention.

“According to the U.S. Department of Agriculture’s Farm Service Agency, just a little over $1 million out of the billions of dollars paid in subsidies in 2009 went to estates or business entities that weren’t entitled to them.”

Yesterday’s GAO report stated at page 162 that, “Recognizing current budget constraints, the National Commission on Fiscal Responsibility and Reform, the Debt Reduction Taskforce, the administration, Members of Congress, GAO, and some farming groups have proposed options to reduce or eliminate direct payments. For example, Congress may wish to consider the following three. To reduce direct payments, the administration and others have proposed lowering payment or income eligibility limits. They argue that lower limits leave payments intact for recipients of smaller payments or with smaller incomes and could therefore still help smaller and beginning farmers. On the other hand, critics say, focusing on payment limits may be ineffective because farmers may develop methods to avoid being restricted by the limits. GAO previously reported that many farmers structure their operations to avoid payment limits and that USDA has not consistently enforced eligibility requirements, bringing into question the effectiveness of both types of limits.

Congress may also wish to consider reducing the portion of a farm’s acres eligible for direct payments. In 2009, GAO reported that reducing the portion of eligible acres to 80 percent from 83.3 percent might save millions of dollars annually. Further reducing the portion of eligible acres to 75 percent could save millions more each year. Such an across-the­ board reduction would affect all recipients. Moreover, Congress may wish to consider terminating the payments. Some agriculture organizations, including the National Farmers Union and the Iowa Farm Bureau, have recommended phasing out or terminating the payments altogether and using the savings to bolster other farm programs.”

Budget Issues: Sec. Vilsack Testimony at House Appropriations Committee

Philip Brasher reported yesterday at The Green Fields Blog (Des Moines Register) that, “Wealthier farmers can afford to give up subsidies to help reduce the federal budget deficit, Agriculture Secretary Tom Vilsack said today. ‘With farm prices as strong as they are today we think it is appropriate to ask the most successful farmers to consider perhaps receiving a little bit less than they have been receiving,’ Vilsack told the House agricultural appropriations subcommittee.” (Note: Sec. Vilsack’s opening statement from yesterday’s hearing is available here).

“Vilsack was defending the administration’s proposal to tighten the income eligibility standards for receiving annual direct payments and other forms of commodity subsidies. The proposal would cut off payments to people with more than $500,000 a year in farm income and $250,000 in off-farm earnings. The caps are now $750,000 and $500,000 respectively.

Iowa Rep. Tom Latham, a Republican member of the subcommittee, said lowering those caps would require opening up the farm bill, and he told Vilsack that isn’t going to happen this year.”

Mr. Brasher added that, “The farm bill isn’t due to be rewritten until 2012. Vilsack has made clear that the administration was going to let Congress take the lead in proposing revisions [related report available here]. But Vilsack did suggest rethinking the $4.8 billion in direct payments that are distributed every year to grain and cotton producers.”

A Reuters news article yesterday (posted at DTN- link requires subscription) reported that, “Budget-cutting Republicans are sure to try to end subsidies to the wealthiest U.S. farmers, a House subcommittee chairman said on Tuesday, after suggesting too much cropland is idled at federal expense.

“President Barack Obama proposed a similar cut in his budget proposal for the fiscal year starting Oct. 1. Agriculture Secretary Tom Vilsack told a House Appropriations subcommittee ‘we’re not going to give up’ on the idea.”

The Reuters article added that, “‘I’m sure there will be an amendment on it,’ subcommittee chairman Jack Kingston told reporters, referring to the roughly $5 billion a year in direct payments. ‘With 87 new budget-cutting Republicans, it’s going to be offered.’

“A similar Obama proposal died last year with lawmakers saying a farm program overhaul is planned for 2012. Iowa Republican Tom Latham said the Agriculture Committee, which oversees subsidies, was not likely to act on the proposal this year either.”

Farm Bill

Marc Heller reported today at the Watertown Daily Times (NY) that, “Sen. Kirsten E. Gillibrand split with the biggest bargaining cooperatives for dairy farmers Tuesday on a key piece of milk-pricing legislation, saying she would rather expand a subsidy paid to farmers than devise a new government insurance program aimed at protecting their profit margins.

“In unveiling a series of proposals to boost the dairy farm safety net, Mrs. Gillibrand said she wants to continue — and possibly expand — the Milk Income Loss Contract program, which pays farmers when milk prices fall below a federal target.

She said she does not support a proposal from the National Milk Producers Federation, representing co-ops, to abolish the MILC program and use the funding instead for a new program to pay farmers based on losses in their operating margins.”

Meanwhile, the Food and Agricultural Policy Research Institute (FAPRI) released a report yesterday titled, “The Economic Impact of the Dairy Market Stabilization Program on 2009 Dairy Markets.” A brief summary of the report stated that, “The Dairy Market Stabilization Program (DMSP) is one part of the National Milk Producers Federation’s Foundation for the Future Program [FFTF]. This analysis shows the impact that DMSP operation would have had on the dairy industry during the low margin period of 2009.”

On page eight, the FAPRI report stated that, “The operation of the DMSP will raise FFTF margins as a result of curbing excess milk supplies and using program monies to purchase cheese from the marketplace. Figure 4 shows the FFTF margin using actual 2009 data relative to the FFTF margin that would have occurred due to the market adjustments of smaller milk supplies and cheese purchases as a result of the DMSP program. The operation of the program raises the margin significantly over the actual observed values in 2009.”

Trade

Yesterday, the U.S. Trade Representative’s Office (USTR) released President Obama’s 2011 Trade Policy Agenda and 2010 Annual Report.

In response to the report, House Ways and Means Committee Chairman Dave Camp (R-MI) stated that, “While I commend the President’s commitment to enforcement as laid out in his Trade Policy Agenda, I am disappointed that the Administration has failed to show the same appetite for opening new markets. The President’s Agenda fails to lay out a concrete plan for generating good U.S. jobs by advancing our pending trade agreements with Colombia and Panama.”

Also yesterday, a long list of new and returning GOP Members of Congress sent the President a letter, which stated in part that, “We stand ready to work with you to ensure that new opportunities are created for our farmers, manufacturers, service providers and workers by passing the three pending free trade agreements with Colombia, Panama and South Korea within the next six months.”

And a Brownfield news article from yesterday stated that, “Speaking Tuesday at the Bayer CropScience Ag Issues Forum in Tampa, Fla., former Secretary of Agriculture Clayton Yeutter said it is time for action on trade agreements.”

Yesterday’s article added that, “Yeutter said, ‘The president needs to tell labor unions to back off and let us get this done. There is no way we are going to meet his goal of doubling exports in the next 5 years unless he starts to show some leadership.’

The trade agreement Yeutter sees as having the greatest potential is the Trans-Pacific partnership. TPP includes the countries of Chile, Peru, Brunei, New Zealand, Singapore, Australia, Malaysia, Vietnam and the United States. Yeutter calls this 9-country group a ‘manageable universe.’ He said it is appealing to American agriculture because this is where our markets are. Although China and India are not yet included, he said they could be bolted on at a later date. Yeutter has personally been involved in negotiating with Japan to get them to join this group. ‘If it does,’ explained Yeutter, ‘U.S. agriculture is going to get very excited.’”

Keith Good

Comments are closed.