FarmPolicy

December 12, 2019

Budget (Farm Bill); Agricultural Economy; Regulations; 1099; and Trade

Budget: Continuing Resolution- Deal Remains Elusive, “Conflicting Messages” Emerge

Naftali Bendavid, Jonathan Weisman, and Carol E. Lee reported in today’s Wall Street Journal that, “Republicans and Democrats stumbled one day closer to a government shutdown on Friday, as the two parties escalated what has become a broader battle over Washington’s role in the U.S. economy.”

“A Tuesday White House meeting called by President Barack Obama featured a series of frustrated exchanges between Senate Majority Leader Harry Reid (D., Nev.) and House Speaker John Boehner (R., Ohio), who upped his demand for spending cuts this year to $40 billion, according to people familiar with the session.”

The Journal writers explained that, “Among the biggest sticking points is that Democrats want more of the cuts to come from ‘mandatory programs,’ whose spending is set by a pre-existing law or formula, like crime-victims’ assistance programs. That would enable them to avoid some cuts in other areas they value, like environmental protection.

“Republicans view these cuts as gimmicks because they are one-time trims that don’t cut future government spending.

House Republicans are offering a one-week extension in government funding that would cut $12 billion from this year’s spending. There is little chance Senate Democrats would consider such a measure.”

Carl Hulse and Jennifer Steinhauer reported in today’s New York Times that, “President Obama on Tuesday flatly dismissed a short-term Republican plan to keep the federal government operating past Friday as Speaker John A. Boehner sought deeper spending cuts, putting Congress and the White House on a course toward a government shutdown.

Showing some exasperation at the impasse over this year’s budget, Mr. Obama appeared at an impromptu White House news conference and said it would be inexcusable if federal agencies were forced to shut their doors beginning Saturday because House Republicans and Senate Democrats could not bridge differences over a relatively small slice of the budget.”

The Times article added that, “One senior Democrat also suggested that if they were to move more in Mr. Boehner’s direction on an overall number, Republicans should expect less from Democrats in the way of the numerous policy provisions and restrictions on Obama administration regulatory efforts sought by Republican lawmakers.”

Marc Ambinder reported yesterday at the National Journal Online that, “Behind this war of words lies a simple political reality: Both Republicans and Democrats understand that the politics of a government shutdown are dicey. While the shutdown of the mid-1990s benefited Bill Clinton and the Democrats, there’s no guarantee it will play out that way this time around. Meanwhile, each side has its own constituencies to placate. Boehner has the tea party pressuring him while the president, who has angered liberals, does not want to give away too much in the name of compromise.”

John Stanton reported today at Roll Call Online that, “Although Senate Majority Leader Harry Reid (D-Nev.) and Speaker John Boehner (R-Ohio) for days have been working on a deal based on $33 billion in cuts, those negotiations stalled as Republicans hardened their demand for larger reductions. A day that was expected to yield a final deal for funding the federal government through the rest of this year devolved into a mad flurry of conflicting messages and politically aimed attacks.”

And The New York Times editorial board indicated today that, “The House Republicans on Tuesday made it clear to anyone who had missed it that they are not interested in a deal on the current federal budget. In a meeting at the White House, they rejected a deal to get through the next six months. President Obama, silent for too long on this fight, emerged from the meeting to say that he would tolerate no more ideological gamesmanship. But the Republicans, if anything, only increased their demands, and a government shutdown seemed likely to begin on Friday.”

 

Budget: GOP FY2012 Proposal- Includes Cuts to Direct Payment, Crop Insurance; SNAP Issues

Jonathan Weisman reported in today’s Wall Street Journal that, “House Republicans unveiled a budget blueprint Tuesday that would significantly reorder and shrink the federal government, aiming to bring the budget into balance, excluding interest payments, by 2015.”

The GOP blueprint stated on page 36 that, “Against the backdrop of an overall economy that is recovering slowly, the American agricultural sector is racing ahead.  The record-breaking prosperity of American farmers and farm communities is to be celebrated. But it also calls for a re-examination of federal agricultural programs that spend billions each year, to ensure that taxpayers aren’t funding support for a sector that is more than capable of thriving on its own.

Net farm income this year is forecast to be the second-highest recorded in the past 35 years. Production costs have risen [related graph], but income has risen faster as prices for major commodities such as corn [related graph] and soybeans [related graph] have outstripped even the rising cost of energy  The top five earnings years for farmers in the last 35 years have occurred in the last decade.  Yet, at the same time, numerous overlapping government programs exist to provide income support to farmers.

With crop prices – and deficits – hitting new highs, it is time to adjust support to this industry to reflect economic realities.  This budget proposes two major reforms to achieve this: First, reduce the fixed payments that go to farmers irrespective of price levels, to reflect that soaring commodity prices are reducing the need for high levels of farm-income support. Second, reform the open-ended nature of the government’s support for crop insurance, so that agricultural producers assume the same kind of responsibility for managing risk that other businesses do.”

(Note that a recent forecast for federal farm payments for 2011 indicates that government outlays are likely to near the lowest level of the past decade, see related graph).

The GOP proposal added that, “Recognizing that the Agriculture Committee is responsible for implementing these reductions, and to maintain flexibility for the Agriculture Committee, this proposal assumes that these savings do not take effect until the beginning of the next farm bill.  These reforms will save taxpayers nearly $30 billion over the next decade.”

Reuters writer Charles Abbott reported yesterday that, “The cuts in farm subsidies and crop insurance would equal 20 percent of projected spending on them, according to Congressional Budget Office figures.

“They would not take effect until an overhaul of U.S. farm law, scheduled for 2012, is completed. That will give the Agriculture Committee flexibility in writing the new farm law, said the Budget Committee.”

Mr. Abbott added that, “Oklahoma Republican Frank Lucas, the Agriculture Committee chairman, said the Budget proposalsare simply suggestions.’

“‘At the end of the day, members of the House Agriculture Committee and I will write the next farm bill,’ said Lucas.”

The Reuters article noted that, “Direct payments, created by the 1996 Freedom to Farm law, are a popular target for deficit hawks, reformers and farm activists. Among main-line farm groups, there are suggestions to move the money into revenue assurance programs.”

Mr. Abbott explained that, “Public nutrition programs such as food stamps, nearly two-thirds of the USDA budget, would also face cuts of 20 percent and land stewardship would be cut by 25 percent, said a farm lobbyist.

“Food stamps would get the same types of reforms as welfare did a decade ago, said the Budget Committee, such as ‘encouraging work, limiting the duration of benefits, and giving states more control over the money being spent.’

“Food stamps, formally named Supplemental Nutrition Assistance Program, are forecast to cost $80 billion this year. Enrollment is a record 44.2 million people, or one in seven Americans.”

At a briefing on the GOP proposal yesterday, Rep. Todd Young (R- Indiana) explained the state block concept with respect to SNAP, a principle that is also being proposed for Medicaid, related audio (MP3- 1:25).

And Rep. Ryan reiterated this concept yesterday at the American Enterprise Institute (AEI), related audio (MP3- one minute).

Also at the AEI event yesterday, in response to a question, Rep. Ryan discussed the proposed budget cuts to farm subsidies in a bit more detail, related audio (MP3- 1:23).

DTN Ag Policy Editor Chris Clayton reported yesterday (link requires subscription) that, “Agricultural programs could face a roughly $3-billion-a-year cut over the next decade under the proposal laid out Tuesday by House Budget Chairman Paul Ryan for 2012 and beyond.”

(Note: Recall that the deficit commission plan from late last year proposed to reduce overall agricultural spending by $1 billion annually).

Yesterday’s DTN article added that, “In nutrition spending, Ryan proposes turning the Supplemental Nutrition Assistance Program (SNAP) into a block grant that would be indexed for inflation after 2015. Aid would be contingent on work or job training. Ryan stated the government cannot manage the growth of SNAP.

“‘The cost of this program has exploded in the last decade, from less than $18 billion in 2001 to over $80 billion today. As recently as 2007, SNAP was projected to cost slightly less than $400 billion over 10 years. Currently, it is projected to cost almost $700 billion.’”

Meanwhile, Philip Brasher reported yesterday at the Green Fields Blog (Des Moines Register) that, “No state has more at stake than Iowa in those proposals. Iowa receives the biggest share of direct farm payments, about 10 percent of the $5 billion distributed each year, and also is the most lucrative state in the nation for the federally subsidized crop insurance business.”

In reaction to yesterday’s GOP proposal, National Corn Growers President Bart Schott noted that, “What is important is that farmers are not singled out — the cuts proposed for agriculture are proportional to those proposed for other areas of the federal budget.”

A National Cotton Council (NCC) news item from yesterday stated that, “The [NCC] is deeply concerned by the extent of the cuts to commodity, conservation and nutrition programs proposed by House Budget Committee Chairman Paul Ryan (R-WI).

These cuts represent 20 percent of the funding baseline for agricultural programs over the next 10 years, and come on top of $6 billion in cuts resulting from the renegotiation of the Standard Reinsurance Agreement in 2010. Agriculture consistently has acknowledged that deficit reduction is a shared responsibility with the expectation that other programs will make equivalent reductions.”

Recall that the 2008 Farm Bill also included reductions in the crop insurance program.

National Farmers Union President Roger Johnson noted in part yesterday that, “Americans spend less than 10 percent of their disposable income on food, which is due in no small part to our national investments in a safe, abundant, and affordable food supply. Our members have called for a reallocation of funds from direct payment programs to other components of the safety net that provide assistance only in times of need. Crop insurance, which has already absorbed steep cuts, should be at the center of the next farm bill, along with permanent disaster programs, countercyclical programs and supply management.”

The Environmental Working Group noted yesterday that, “In a time of robust farm income and tight budgets, the House Republican budget resolution takes a small but welcome step toward a more equitable and sensible support structure for American farmers.”

Also with respect to yesterday’s GOP proposal, The Wall Street Journal editorial board noted today that, “Mr. Ryan’s budget rollout is an important political and policy moment because it is the most serious attempt to reform government in at least a generation.”

In more specific news regarding the Farm Bill, Senate Agriculture Committee Chairwoman Debbie Stabenow (D- Michigan) was a guest on yesterday’s AgriTalk program with Mike Adams; to listen to their conversation from yesterday, just click here (MP3- 5:06).

 

Agricultural Economy

Tom Polansek reported yesterday at The Wall Street Journal Online that, “U.S. corn futures climbed to a new record as concerns increased about shrinking supplies.

“Corn for May delivery, the most actively traded contract, settled up 6.5 cents, or 0.9%, at $7.6675 a bushel, a record-high settlement. The market set the new record a day after matching the previous high, set in June 2008, on the Chicago Board of Trade.”

The Journal article noted that, “The latest surge in futures was supported by worries federal forecasters on Friday could make a significant cut in their forecast for end-of-season supplies, known as ending stocks, on the heels of the quarterly inventory report. U.S. supplies already are projected to reach a 15-year low of 675 million bushels by the end of the marketing year on Aug. 31.”

Dow Jones writer Surabhi Choudhary reported yesterday that, “Corn futures on the Chicago Board of Trade may rise to $8 a bushel in the next three months due to robust demand for animal feed and ethanol amid tight supply, Colin O’Shea, head of commodities at Hermes Fund Managers Ltd., said Tuesday.”

 

Regulations

An update from the House Agriculture Committee noted yesterday that, “This week during The Ag Minute [MP3], Chairman Frank Lucas, discusses the need to pass H.R. 910, the Energy Tax Prevention Act of 2011. The legislation will prevent the Environmental Protection Agency (EPA) from regulating greenhouse gases under the Clean Air Act. The U.S. House of Representatives is expected to vote on the bill this week.”

However, Ben Geman noted yesterday at the Hill’s Energy Blog that, “The White House is reiterating its threat to veto legislation slated to pass the House on Wednesday that would strip the Environmental Protection Agency’s (EPA) power to regulate greenhouse gas emissions.”

And Ben Geman and Andrew Restuccia reported yesterday at The Hill’s Energy Blog that, “The Senate will vote on a GOP-backed plan to kill Environmental Protection Agency climate change rules Wednesday afternoon, according to Democrats and a spokesman for Senate Minority Leader Mitch McConnell (R-Ky.).

“Lawmakers will vote on McConnell’s amendment to small-business legislation, as well as several Democratic alternatives. The amendments need 60 votes to pass.”

 

1099

Kathleen Hunter reported yesterday at Roll Call Online that, “The Senate on Tuesday voted to send to President Barack Obama a bill that would make the first significant change to Democrats’ signature health care overhaul law…[T]he provision, which requires companies to file a 1099 form with the IRS every time they conduct $600 worth of business with a vendor, has been panned by Members of both parties, who claim it is overly burdensome to small businesses.”

Nebraska GOP Sen. Mike Johanns applauded this legislative action yesterday on the Senate floor.

 

Trade

Tom Barkley and Carol E. Lee reported in today’s Wall Street Journal that, “The U.S. and Colombia will likely announce an agreement Wednesday on a free-trade deal after several weeks of intensive talks on labor issues, a senior Obama administration official confirmed Tuesday.

“The long-awaited deal could break a logjam that had threatened to derail the administration’s trade agenda for the year, potentially clearing the way for passage of pacts with South Korea and Panama that had been held over from the Bush administration.”

Keith Good

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