Budget: House Passes FY12 Budget; the Debt Ceiling; and the “Gang of Six”
Janet Hook and Naftali Bendavid reported in Saturday’s Wall Street Journal that, “House Republicans voted Friday to adopt a budget blueprint that would cut federal spending by $5.8 trillion over the next decade and fundamentally change the popular Medicare program for people under 55, a move that represents the party’s biggest political wager since winning a House majority in November.
“The measure was approved on a party-line vote of 235 to 193, with four Republicans joining every Democrat in opposing it.
“The measure is likely to die in the Democratic-controlled Senate. But the unified GOP vote is sure to strengthen the hand of House Speaker John Boehner (R., Ohio) as he negotiates with Democrats and Senate Republicans on other major fiscal issues, such as the terms on which his caucus would support a measure raising the nation’s debt ceiling.”
The Journal article noted that, “President Barack Obama, in an interview with the Associated Press, said the debt ceiling wouldn’t be raised ‘without some spending cuts.’ But White House spokesman Jay Carney said raising the debt ceiling was ‘an imperative that shouldn’t be linked or held hostage to any other action.’”
Saturday’s article added that, “Mr. Obama will take the fiscal fight on the road next week, headlining town-hall events and fund-raisers in California, Virginia and Nevada, at which he is expected to use the House GOP budget as his foil.”
Carl Hulse reported in Saturday’s New York Times that, “The [budget resolution] vote represents the most ambitious effort yet by the new Republican majority in the House to demonstrate that it intends to aggressively rein in spending and shrink government. It doubles as a challenge to President Obama over which party is more determined to force a sharp shift in the handling of federal dollars.
“‘The spending spree is over,’ Mr. Ryan said. ‘We cannot keep spending money we don’t have.’
“Almost as soon as the budget was approved, Senator Harry Reid, Democrat of Nevada and the majority leader, vowed that the plan would never pass the Senate, setting up another tense showdown with House Republicans over spending as well as over an administration request to raise the federal debt limit.”
With respect to the debt limit issue, Mark Gongloff and Patrick O’Connor reported in Saturday’s Wall Street Journal that, “The government has said it would reach its borrowing limit on May 16 and risks defaulting on its debt on July 8 without fresh funds to pay interest on existing debt. Some lawmakers think the debate could continue past May 16 without causing too much damage.”
And James Risen reported in today’s New York Times that, “Treasury Secretary Timothy F. Geithner said Sunday that Congressional Republican leaders had signaled strongly to the White House that they would vote in favor of raising the national debt ceiling, despite pressure from some lawmakers in the party to use the coming vote as leverage to seek deep spending cuts.
“In a pair of appearances on Sunday talk shows, Mr. Geithner said the Republican leaders made it clear to President Obama in a White House meeting last Wednesday that they would go along with the administration’s efforts to raise the debt ceiling to avoid a financial crisis.
“‘Congress is going to have to raise the debt limit,’ Mr. Geithner said on the NBC program ‘Meet the Press.’ ‘They understand that. That’s absolutely essential to preserve the creditworthiness of the United States of America.’” (Note that related audio from Sec. Geithner from yesterday’s Meet the Press program is available here (MP3- 1:22)).
Today’s Times article added that, “In a statement, Michael Steel, a spokesman for Speaker John A. Boehner of Ohio, said Mr. Boehner had made it plain to the president at the White House meeting that more spending cuts would be the price for a debt ceiling deal.
“‘Boehner has been very clear: the American people demand that any increase in the debt ceiling be accompanied by spending cuts, and real reforms so we can keep cutting,’ Mr. Steel said.
“Representative Paul D. Ryan of Wisconsin, chairman of the House Budget Committee, gave a similar response to Mr. Geithner’s assertions on the CBS program ‘Face the Nation.’” (Note that related audio from Rep. Ryan from yesterday’s Face the Nation program is available here (MP3- 1:30)).
Jackie Calmes reported in yesterday’s New York Times that, “Days after President Obama called for forming a bipartisan group in Congress to begin negotiating a $4 trillion debt-reduction package, the parties have not even agreed to its membership. Yet six senators — three Democrats, three Republicans — say they are nearing consensus on just such a plan.
“Whether the so-called Gang of Six can actually deliver something when Congress returns from a recess in May could determine whether Democrats and Republicans can come together to resolve the nation’s fiscal problems before the 2012 elections.”
Kyle Trygstad reported yesterday at Roll Call Online that, “[Sen. Tom Coburn (R-OK)] is a member of the bipartisan ‘gang of six’ Senators who are also working on budget legislation based on the recommendations of the president’s National Commission on Fiscal Responsibility and Reform. He said the group will offer a separate budget plan that no one will like — which he called a good sign.”
Budget: Agricultural Issues
With respect to the budget and agricultural spending for the remainder of this fiscal year (2011), an update posted on Friday at the National Sustainable Agriculture Coalition (NSAC) blog indicated that, “On Thursday, April 14, Congress passed a final 6-month continuing resolution (CR) that will fund the government through the end of the fiscal year…[O]verall, the CR cuts discretionary agriculture spending by $3 billion or 14 percent relative to FY 2010 levels. While steep, the cut is lower than the 22 percent cut proposed in the earlier House-passed CR.”
The NSAC update added that, “As with H.R. 1, – an earlier CR passed by the House but rejected by the Senate – Farm Bill mandatory conservation programs would take a massive cut of more than $500 million in the final appropriations bill for the remainder of FY 2011. The bill proposes to cut funding for the Conservation Stewardship Program (CSP) by $39 million, the Wetlands Reserve Program (WRP) by 19 percent (nearly 48,000 acres), and the Environmental Quality Incentives Program (EQIP) by $350 million relative to the level provided in the 2008 Farm Bill.”
Friday’s update explained that, “As we move forward into the FY 2012 appropriations process, it is worth taking a moment to reflect on the Chairman’s deficit reduction strategy. We are still a full year away from taking up the 2012 Farm Bill, yet the House, Senate and Administration has already shown a willingness to take away mandatory farm bill funding for conservation before debate even begins. President Obama’s proposed FY 2012 budget calls for deep, permanent cuts of over $1 billion to mandatory spending for farm bill conservation programs.
“This is all the more important next year, and here is why. Any changes in mandatory program spending that occur in the FY 2012 appropriations bill will reduce the farm bill baseline for 10 years, not only 1 year as did the FY 2011 bill. This is because actual spending in the final year of any farm bill cycle (in this case, 2012) is assumed by the Congressional Budget Office (CBO) to establish the new baseline for each program for farm bill purposes. Hence, according to CBO, the President’s proposed cuts to the conservation title in his FY 2012 request will have the result of reducing the farm bill baseline by nearly $5 billion.”
Meanwhile, a release on Friday from the House Committee on Agriculture- Democrats, regarding the House passed FY2012 Budget Resolution, stated that, “While the budget would leave it to the Agriculture Committee to choose what programs to cut, they have suggested a $127 billion cut to food stamp programs, an approximately $30 billion cut to commodity programs and about $20 billion cut to other programs, possibly conservation programs.”
The release added that, “Simply put, agriculture takes a disproportionate share of cuts. Agriculture Committee programs are cut 23 percent, compared to only an average 14 percent cut for other committees. The Budget Resolution makes only minimal cuts to Defense. If we truly want to get serious about the deficit, everything has to be on the table.
“Additionally, agriculture has already made significant budget cuts both through the 2008 Farm Bill process and through last summer’s reforms to crop insurance which cut $6 billion, all of which, according to the Congressional Budget Office, went to deficit reduction. The House Republican Budget Resolution fails to recognize the steps agriculture has already taken.”
Farm Bill- Issues
Beyond budgetary concerns for the next Farm Bill, other issues have also been highlighted in recent articles.
Tom Lutey reported on Thursday at the Billings Gazette Online (Montana) that, “High grain prices three of the past four years will be on farmers’ minds Friday as they decide whether to enroll in the federal Conservation Reserve Program…[W]ith grain prices near historic highs, some farmers would have to turn down some of the best crop payments they’ve ever seen to remain in the program or put new acres into it. The farmer in them is going to want to produce.”
Also, Robert Paarlberg, a professor of political science at Wellesley College and adjunct professor of public policy at the Harvard Kennedy School, penned a recent article (“The Inconvenient Truth About Cheap Food and Obesity: It’s Not Farm Subsidies”) that was posted at GOOD magazine Online.
In part, the article explained that, “So federal farm subsidy programs are not the cause of our obesity crisis. There is no denying that obesity-inducing foods are now cheap relative to consumer income in the United States, but this is not due to farm subsidies.
“The cause is higher personal income plus productivity growth in our food and farm industries. On the farm, new precision technologies such as GPS systems, satellite-controlled variable rate chemical applications, efficient drip irrigation, and improved crop genetics are continuously reducing production costs, and lowering consumer prices. Nor is it just the crops grown by subsidized farmers that have become cheap. One USDA study in 2008 found that over the previous 25 years the price of un-subsidized fruits and vegetables—controlling for season and quality—had fallen at almost exactly the same rate as the price of chocolate chip cookies, cola, ice cream, and potato chips. So that other popular claim—Americans are obese because unsubsidized healthy foods have become more expensive—is also bogus.”
Dr. Paarlberg added that, “What motivates so many smart people to ignore this evidence and blame America’s over-eating on farm subsidies? For Cato, George Will, and the libertarian right, the careless thinking springs from an understandable urge to use any argument available against wasteful farm subsidies. On the anti-corporate left, [author Michael Pollan] and others (e.g., the film Food, Inc.) want to blame our nation’s obesity crisis on an imagined ‘cheap food’ deal between food industries and their friends in Congress. When it comes to crop prices, however, farmers have more clout with Congress than food companies, so the farm bill and the ethanol program tend to increase rather than decrease food prices. This actually hurts food companies, an inconvenient truth the critics intentionally ignore.”
Reuters writer Christine Stebbins reported on Friday that, “The U.S. agricultural economy is the healthiest in years as rising farm income allows farmers to pay off debt and buy land and machinery to meet booming demand for crops and livestock.
“So why worry?
“Because historically low interest rates and rising land values heighten concern about speculative bubbles, a debt binge and all the risks associated with seesawing commodity prices, according to one federal official.”
The article added that, “‘It’s not an issue right now,’ Jason Henderson, vice president and chief economist at the Kansas City Federal Reserve Bank, said in an interview. ‘But going forward, we are going to be watching those debt levels and leverage ratios.’”
Bloomberg writer Joshua Zumbrun reported on Friday that, “Federal Reserve Bank of Kansas City President Thomas Hoenig said that an increase in interest rates could trigger a 33 percent decline in the price of agricultural land.
“‘If interest rates rise we could lose a third of the value of that land in a very short time,’ Hoenig said today in a speech in West Lafayette, Indiana.
“Land prices are possibly being driven by ‘inflationary impulses,’ and ‘it’s also driven by interest rates’ at unusually low levels, he said in a lecture for the Purdue University Department of Agricultural Economics.”
And Hembree Brandon reported last week at the Delta Farm Press Online (“Farmland boom: potential for credit problems down the road?”) that, “‘While we don’t see a credit problem in agriculture at this time, the steep rise in farmland prices we have seen in recent years creates the potential for an agricultural credit problem sometime down the road,’ [Sheila Bair, FDIC chairman] said. ‘And that’s precisely the sort of long-term risk that farm operators, lenders, and regulators need to stay attuned to as they carry out their day-to-day business.’”
The article added that, “Joseph W. Glauber, chief economist for the USDA, noted that while farmland values have risen sharply over the past five years, ‘increases appear to be generally consistent with the rise in farm income and low interest rates, and comparisons to the 1970s seem unfounded.’”
Meanwhile, Dan Piller reported on Saturday at the Des Moines Register Online that, “The world has more at stake than ever this spring as Iowa farmers load their planters with corn seed and head into the fields.
“Those huge surpluses of corn that Americans have taken for granted for generations are gone. The amount of U.S. corn is expected to shrink to scarcely more than a week’s supply by late summer, reduced by a smaller crop last year and record demand from ethanol plants and other countries.
“A problem with this year’s crop, like the record rains that cut Iowa’s 2010 corn harvest yield by 9 percent from the previous year, could send corn prices to unprecedented double-digit levels.”
The article added that, “‘We’ve never had a situation this tight right at the beginning of planting,’ said Iowa State University economist Chad Hart. ‘Even if we get a really good crop this year, it will just meet the expected demand.’”
Bloomberg writer Eric Martin reported on Saturday that, “World Bank President Robert Zoellick said the global economy is ‘one shock away’ from a crisis in food supplies and prices… Food price inflation is ‘the biggest threat today to the world’s poor,’ Zoellick said at a press conference following meetings of the World Bank and the International Monetary Fund. ‘We are one shock away from a full-blown crisis.’”
Dow Jones news reported on Saturday that, “Uganda’s president said Saturday that the police would step up a crackdown on protests against raising food and fuel prices.”
Philip Brasher reported on Friday at the Green Fields Blog (Des Moines Register) that, “Meat and poultry sold in supermarkets may be widely contaminated with staph bacteria that are resistant to antibiotics, according to a study released today. Researchers tested beef, chicken, pork and turkey from stores in five cities and found Staphylococcus aureus bacteria in nearly half of the samples. In 52 percent of those contaminated samples the bacteria were resistant to at least three classes of antibiotics.”
Mr. Brasher added that, “The American Meat Institute [AMI], a meatpackers’ trade group, said the study was too small ‘to reach the sweeping conclusions conveyed in a press release about the study.’”
An AMI news release on Friday stated that, “A new Pew Commission-funded study misleads consumers about U.S. meat and poultry, which is among the safest in the world.
“Authors of the new study, which involved a small number of samples from retail stores, claim that their findings suggest that a significant public health risk exists. However, federal data from the Centers for Disease Control and Prevention (CDC) show steady declines in foodborne illnesses linked to consumption of meat and poultry overall and indicate that human infections with Staphylococcus aureus (‘Staph’) comprise less than one percent of total foodborne illnesses.”
National Cattlemen’s Beef Association President Bill Donald also commented on the report on Friday.
In other news, Queenie Wong reported on Friday at The Seattle Times Online that, “Some national animal-welfare groups are up in arms over a bill they fear will weaken their efforts to get Washington [state] egg producers to stop caging hens.
“Senate Bill 5487 would require Washington egg producers to phase out their current cages for more spacious ones by 2026. Supporters say the bill would improve conditions for the hens without unduly raising the cost of egg production.”
The article noted that, “Animal-welfare advocates, however, say the new cages still wouldn’t be big enough.
“‘The animals are still confined in cages, they’re not given very good dust baths, and their freedom of movement is still very much restrained,’ said Gene Baur, president of Farm Sanctuary, an animal-welfare group based in New York.”
Meanwhile, a news release from Friday from the United Egg Producers stated that, “As the economy makes a sluggish recovery, American families continue to find themselves struggling with food insecurity. According to the United States Department of Agriculture (USDA), 50 million Americans, or one in six, live in food insecure households, including 17 million children. In response to the need, America’s egg farmers are donating more than 11 million eggs this Easter season to food banks across the nation as part of its fourth year working with Feeding America to supply fresh eggs to the communities they serve.”
In related news, a supplement included in Friday’s edition of USA Today in newspapers in Chicago, New York, Los Angeles and Minneapolis highlighted the issue of hunger. The supplement features ads from groups such as World Vision, Feeding America and others, and for the first time, an ad for “Peanut Butter for the Hungry.”
The ad features the new website www.Peanutbutterforthehungry.org.