FarmPolicy

September 19, 2014

Votes on Ag Spending and Biofuels Presages 2012 Farm Bill Debate

Categories: Audio /Ethanol /Farm Bill

Farm Bill Issues

Molly K. Hooper and Pete Kasperowicz reported last night at The Hill Online that, “The House on Thursday narrowly approved a 2012 Agriculture spending bill in a vote that tested Republican unity.

“Members in the chamber stopped to watch as the vote tally settled at 217-203 in favor of the third fiscal 2012 appropriations bill to be considered in the House this year.

“During a two-hour series of votes on amendments, members of the GOP leadership team, including Majority Leader Eric Cantor (Va.), Majority Whip Kevin McCarthy (Calif.) and Chief Deputy Whip Peter Roskam (Ill.) scrambled around the chamber to persuade on-the-fence Republicans to vote yes.”

The Hill writers explained that, “Nineteen Republicans joined every Democrat in opposing the bill, including one of the two freshman representatives on the GOP leadership team, Rep. Kristi Noem (S.D.).”

“Other Republicans who rejected the bill included Reps. Justin Amash (Mich.), Michele Bachmann (Minn.), Joe Barton (Texas), Jeff Flake (Ariz.), Steve King (Iowa), Ron Paul (Texas) and David Schweikert (Ariz.).”

Yesterday’s article pointed out that, “In a vote of 223-197, the House approved Democratic Rep. Ron Kind’s (Wis.) amendment to prohibit World Trade Organization-directed funds to the Brazil Cotton Institute” [background on that trade case available here and here].

GOP leaders had to assure members of the conference, including a key member of the GOP deputy whip team, that the issue would be revisited as the bill moves to conference.

“Deputy Whip Mike Conaway (R-Texas) ‘reluctantly’ supported the final bill, as a result of those assurances.”

“One of the biggest concerns Democrats had with the bill was the more than $600 million offered in cuts to the Women, Infants and Children (WIC) nutrition program. These cuts largely remained intact, despite Democratic attempts on Tuesday to argue the funding should be restored,” the Hill article said.

Bill Tomson reported yesterday at The Wall Street Journal Online that, “Spending on the USDA’s Women Infants and Children program was lowered by $685 million, an action that Democrats warned would leave hundreds of thousands of people without needed assistance. Republicans argued that there are contingency funds that would make sure no one would be left without needed aid.

The Senate must also approve its own version of the 2012 agriculture spending bill before legislation can be sent to the White House to be signed into law by Mr. Obama.”

David Rogers reported last night at Politico that, “Reversing the House stand of just months ago, members opted to block future U.S. payments to Brazil cotton interests, a patchwork trade arrangement that now costs taxpayers $147 million annually and is designed to buy peace for the continued subsidies paid to American growers.”

On the House floor yesterday, Rep. Jeff Flake (R-AZ) argued in support of a cotton related measure, a portion of his arguments can be heard here (MP3- 2:03).

On the other and, House Ag Committee Chairman Frank Lucas (R-OK) made points against the amendment- FarmPolicy audio (MP3- 1:45), as did House Ag Committee ranking member Collin Peterson (D-Minn.)- FarmPolicy audio (MP3- 2:18).

Mr. Rogers added in his Politico article that, “Indeed, with deficit reduction talks underway across the Capitol, the farm lobby concedes that Thursday’s votes are only the opening shot in a bigger fight over a new farm bill next year. Annual direct payments are almost certain to be reduced under the recommendations coming from the House-Senate negotiations being led by Vice President Joe Biden. And meeting Thursday, the Biden group again discussed farm subsidy savings as it tries to find the right level of reduction.

“Anticipating this, House Agriculture Committee Chairman Frank Lucas (R-Okla.) has accelerated his plans for drafting new farm legislation. ‘It’s a good lesson for all of us on the Ag committee,’ Lucas told reporters after the appropriations fight. ‘A good many folks walked on the floor and did a gut-jerk vote,’ he said, explaining his defeat on cotton. But going forward, he warned: ‘Members of the Agriculture Committee are going to have to work harder than we have ever worked before in relationship with our colleagues in the House.’”

In additional analysis, Mr. Rogers added that, “Adopted 217-203, the underlying spending bill Wednesday reflects the second round of appropriations cuts in a matter of months — a total 25% reduction from funding levels only a year ago in fiscal 2010. And as food aid programs — at home and abroad — are targeted for major reductions, this has strained old alliances for the farm lobby even as Republicans have felt less committed to agriculture — and traditional farm powerhouses like the ethanol lobby.”

With respect to the future and the 2012 Farm Bill, Art Hovey filed a report earlier this week at the Lincoln Star Journal (Neb.) Online that included this remark from Rep. Jeff Fortenberry (R-Neb.): “It’s already clear that ‘direct payments will be closely scrutinized, probably reduced, and maybe eliminated.”

“But Fortenberry said any action of that kind should come in writing the 2012 farm bill and not as a result of wrangling this week between the House Appropriations Committee and other House lawmakers.”

Mr. Hovey noted too that, “Sought out earlier, Nebraska U.S. Sens. Mike Johanns and Ben Nelson said crop insurance is an increasingly valuable alternative to government payments as a way of cushioning farmers against risk.”

In reaction to the passage of yesterday’s House appropriations measure, Ranking Member Peterson stated in part that, “Agriculture is under assault in this Congress. We first saw it with the Ryan budget, which cut $178 billion from agriculture programs. And today, Congress approved a bill that makes disproportionate cuts to agriculture, including vital conservation and nutrition programs. Additionally, the bill includes an unprecedented nearly $2 billion in changes to mandatory spending, taking funds from carefully negotiated farm bill programs. Furthermore, the funds that would allow the CFTC to move ahead with financial reforms and bring about a more open and transparent derivatives market were slashed.”

Chris Clayton reported yesterday at DTN that, “Rep. Ron Kind, D-Wis., who has pushed for several years to reduce farm-program payments, was one of several lawmakers who worked to strip the Brazilian cotton settlement from the bill. Kind’s amendment, which passed 223-197, reflected a subtle shift in the long-standing defense of farm programs in Congress.

“‘It is really the first ding in a very impenetrable armor here in Congress for many, many years, if not decades, in how the commodity groups are able to circle the wagons and maintain these taxpayer subsidies going to a few, very large agribusinesses in our country,’ Kind said. ‘The passage of this amendment is an indication we might have a new school of thought as far as looking at these domestic subsidy programs, as far as deficit reduction, and the market distortion that they create.’

Yet, those efforts to change farm policy only went so far. House members defeated an amendment that would have set a farm-payment cap at $125,000. The House also defeated an amendment that would have lowered income eligibility to $250,000 adjusted gross income.”

On the House floor yesterday, Rep. Earl Blumenauer (D-Oregon) addressed issues associated with commodity payments to farmers- FarmPolicy audio (MP3- 2:08), while Chairman Lucas- FarmPolicy audio (MP3- 1:42), and Ranking Member Peterson- FarmPolicy audio (MP3- 1:36) argued that the income eligibility amendments were misplaced.

Rep. Flake also made points in favor of an amendment regarding income eligibility requirements yesterday- FarmPolicy audio (MP3- 1:04).

Mr. Clayton added in his DTN article from yesterday that, “Missouri cotton farmer Charles Parker, chairman of the NCC, stated the Kind amendment places the United States in violation of a trade settlement with Brazil.

“‘The NCC is committed to work with Congress and the administration to ensure the U.S. can continue to comply with the Framework Agreement to avoid serious disruption in trade and to identify a solution to the dispute,’ Parker stated.”

The AP reported yesterday that, “The Senate has not weighed in on the [cotton] issue.”

Philip Brasher reported yesterday at the Green Fields Blog (Des Moines Register) that, “In a rebuff to Agriculture Secretary Tom Vilsack, the House voted to stop him from spending money on the administration’s Know Your Farmer, Know Your Food initiative that’s promoting local foods and small-scale agriculture.”

And the National Pork Producer’s Council indicated a news release from yesterday that, “Livestock and poultry organizations today praised House lawmakers for approving an agriculture funding bill that prevents the U.S. Department of Agriculture (USDA) from finalizing its proposed regulation on livestock and poultry marketing contracts.”

Lyndsey Layton reported at The Washington Post Online yesterday that, “Arguing that the U.S. food supply is 99 percent safe, House Republicans cut millions of dollars Thursday from the Food and Drug Administration’s budget, denying the agency money to implement landmark food safety laws approved by the last Congress.

“Saying the cuts were needed to lower the national deficit, the House also reduced funding to the Agriculture Department’s food safety inspection service, which oversees meat, poultry and some egg products.”

Beyond the appropriations process, news regarding negotiations on federal spending and the debt ceiling continues to unfold.

David Rogers reported last night at Politico that, “Vice President Joe Biden said it’s time for the trading to begin in deficit-reduction talks with Congress, that neither political party can do this alone and world markets must be shown ‘we can handle difficult decisions’ and ‘it has to be real.’

“Coming out of his third two-hour plus meeting this week with lawmakers at the Capitol, Biden predicted up to four longer sessions next week with intensified ‘round the clock’ staff work.”

Lori Montgomery reported yesterday at The Washington Post Online that, “So far, negotiators have plowed through the major categories of the federal budget, looking for areas of common ground. Democrats and Republicans are interested in cutting farm subsidies, for example, and both sides want to sharply slow the growth of spending on government agencies.”

Steven T. Dennis reported last night at Roll Call Online that, “Biden said that there will be four meetings next week, and he’s asked the principals to block off more time in the schedule for the talks.”

With this background in mind, Chris Clayton reported yesterday at DTN (link requires subscription) that, “Senate Agriculture Committee Chairwoman Debbie Stabenow stressed Thursday that agriculture programs could face extreme cuts under plans being considered in federal deficit talks.

“Stabenow, a Democrat from Michigan, and other agricultural leaders in Congress have argued that cuts to USDA programs appear disproportionate compared to other areas of the federal budget.”

Mr. Clayton added that, “Speaking to the National Council of Farmer Cooperatives, Stabenow said budget negotiators led by Vice President Joe Biden have taken a budget passed by the House as a starting point for budget-cutting talks. That includes $48 billion in cuts in commodity and conservation programs over 10 years.

“‘These cuts are extreme and they are not the place to start on negotiations,’ Stabenow said.”

“Agricultural groups are learning more details on Biden’s deficit negotiations. Reported statements have pointed out one area of agreement for slashing budgets would include the $5 billion annual direct payments and other safety-net programs for farmers,” the DTN article said.

Jennifer Steinhauer and Carl Hulse reported in today’s New York Times that, “The House approved large cuts in food aid for the poor and various agriculture programs on Thursday after a steely weeklong debate that pitted Democrats against Republicans, and farm-state members against those within their own party who vehemently oppose certain types of farm aid.

At the same time, the Senate voted 73 to 27 to end tax credits and trade protection that benefit the corn-based ethanol industry, with broad bipartisan backing. As a practical matter, the measure ending federal ethanol benefits will probably not become law because it is part of a larger measure that is likely to fail. But the lopsided ethanol vote showed that Congressional support for ethanol is eroding and signaled that many Senate Republicans who voted to kill the tax credits might favor some measures that reduce the deficit by ending a tax break.”

The Times article noted that, “Further, the agriculture spending bill, which reduces discretionary spending by $2.7 billion from last year’s level, along with the Senate’s ethanol vote sets the stage for the impending farm bill, in which agricultural crop subsidies, often derided but generally left in place, might face a serious threat in a Congress bent on cutting spending.”

 

Biofuels: Additional Analysis

Chris Clayton reported yesterday at DTN that, “Ethanol got clobbered Thursday on Capitol Hill.

“Reversing a vote from Tuesday, the U.S. Senate voted 73-27 to immediately end the 45-cent-per-gallon Volumetric Ethanol Excise Tax Credit, otherwise known as the blenders’ credit, and the 54-cent import tariff.

The vote came after the House of Representatives also had voted 283-128 as part of the House Agriculture appropriations bill to block USDA from using funds next year to help fuel stations offset the costs of installing ethanol blender pumps.”

Mr. Clayton stated that, “‘You can see there is waning support for these ethanol subsidies,’ said Rep. Jeff Flake, R-Ariz., in an interview off the House floor. ‘For those of us who are rediscovered fiscal conservatives, there’s little room for ethanol subsidies.’

“Later in the afternoon, Sen. John McCain, R-Ariz., had a vote on similar language to block funding for ethanol infrastructure. Yet, that proposal lost by a 41-59 vote.”

The DTN article added that, “But the major vote was in the Senate to end the blenders’ credit and import tariff. The Senate had just voted on an almost identical bill Tuesday offered by Sen. Tom Coburn, R-Okla. That bill was defeated in a 40-59 vote.

“The Senate bill would end the tariff on June 30, even though that would also require the House to pass an identical measure by then. Further, lawmakers pushed to immediately end the blenders’ credit and import tariff even though both are already set to expire at the end of the year under current law.”

“Sen. Dianne Feinstein, D-Calif., sought the new vote, which Majority Leader Harry Reid, D-Nev., agreed to allow Wednesday. Feinstein, on the Senate floor, repeated her argument that no other industry has a ‘triple crown’ of protections that included a tax credit, a tariff and a mandate to use,” the DTN article said.

Also on the Senate floor yesterday, Iowa GOP Senator Charles Grassley (related comments)- FarmPolicy audio (MP3- 2:21), and Sen. John Thune (R-SD)- FarmPolicy audio (MP3- 0:46)  spoke in support of ethanol.

Noting broader implications of the Senate vote, Naftali Bendavid and Stephen Power reported in today’s Wall Street Journal that, “A broad bipartisan majority of the Senate voted Thursday to end more than three decades of federal subsidies for ethanol, signaling that other long-sacrosanct programs could be at risk as Democrats and Republicans negotiate a sweeping deficit-reduction deal.”

“Thursday’s vote doesn’t by itself doom federal support for the corn ethanol industry. The House is expected to reject the repeal as unconstitutional because tax bills must originate in that chamber, and the White House opposes it. But the 73-27 vote signals that once-unassailable programs could be vulnerable,” the Journal writers explained.

Darren Goode reported yesterday at Politico that, “The vote was mostly symbolic as the underlining economic development bill is not likely to make it into law, but it’s the latest sign that lawmakers are ready to kick ethanol subsidies to the curb.”

Philip Brasher reported yesterday at the Green Fields Blog (Des Moines Register) that, “The vote was largely symbolic in that the House is expected to reject the provision because tax measures are supposed to originate in the House, not in the Senate. But the sweeping defeat was a powerful indication of how the industry’s once legendary political clout on Capitol Hill has all but disappeared because of the federal deficit and concerns about the impact of the biofuel on food prices and the environment.”

Mr. Brasher added that, “The industry has been on the defensive to such an extent that it’s backing a bill introduced by Sen. Amy Klobuchar, D-Minn., and John Thune, R-S.D., that would repeal the 45-cent subsidy July 1 and devote $1 billion of the savings to deficit reduction. The bill also would create a new subsidy tied to the price of oil and underwrite the cost of installing new ethanol pumps at service stations. Linking the subsidy to oil prices is designed to protect the ethanol industry when oil prices fall and refiners have less incentive to use the biofuel.”

The ethanol industry did achieve one victory today when the Senate rejected, 59-41, a proposal by Sen. John McCain, R-Ariz., to block the Obama administration from subsidizing the installation of ethanol pumps and storage tanks. However, the House approved a similar measure 283-128 earlier in the day as part of an appropriations bill for the Agriculture Department,” the Register item said.

Ben Geman reported yesterday at The Hill’s Energy Blog that, “Agriculture Secretary Tom Vilsack called Thursday’s Senate vote in favor of quickly killing a major ethanol industry tax break ‘ill advised,’ alleging it will cost jobs.”

The Wall Street Journal editorial board indicated today that, “The 73-27 vote on an amendment sponsored by California Democrat Dianne Feinstein—33 Republicans, 38 Democrats and both independents in favor—was the kind of supermajority that usually waves through new subsidies for the fuel made from blending corn and tax dollars. Ending the annual $6 billion subsidy, along with the tariff on foreign ethanol, marks the first time in memory that the ethanol lobby has lost a major vote, as the left-right coalition that wants to eliminate its subsidies and mandates continues to grow.

“For now, this victory for energy and fiscal sanity is incomplete, because the underlying bill—a new engine for green subsidies—is unlikely to pass the Senate, let alone the House. Still, ethanol’s decades on the public dole appear to be numbered. The 27 ‘nays’ were essentially the Farm Belt contingent, with the disappointing addition of Ohio Republican Rob Portman.

“The House also voted yesterday, 283-128, to bar public spending on the special blender pumps and tanks necessary for higher concentrations of ethanol. This is significant because the ethanol lobby has been counting on the pump and tank subsidy to replace the tax credits and tariffs. The Senate defeated a similar amendment from John McCain yesterday, so House Members will need to be on the lookout for this to appear at 3 a.m. in some ‘must have’ legislation.”

Keith Good

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