- FarmPolicy - http://farmpolicy.com -

Farm Bill- Budget Developments (Policy Issues); and the Ag Economy

Farm Bill Issues: Budget Implications- Debt Deal

Naftali Bendavid and Carol E. Lee reported in Saturday’s Wall Street Journal that, “The House on Friday approved a bill pushed by Speaker John Boehner to raise the government’s borrowing limit, a difficult victory for Republican leaders that came only after they added a requirement for a constitutional balanced-budget amendment to placate rebellious conservatives.

“The bill passed the House 218-210. A short while later, the Democratic-led Senate voted 59-41 to block the measure, setting the stage for last-ditch negotiations this weekend on a potential compromise that could win bipartisan support.”

Lori Montgomery and Rosalind S. Helderman reported in Sunday’s Washington Post that, “With the prospect of a government default just three days away, the White House entered intense negotiations with Senate Minority Leader Mitch McConnell on Saturday in a last-ditch bid to forge a bipartisan agreement to raise the federal debt limit.

“The emerging agreement calls for raising the $14.3 trillion debt limit by up to $2.4 trillion in two stages, with the debt limit rising unless two-thirds of both chambers of Congress disapprove, according to officials in both parties familiar with the talks. That would extend the Treasury’s borrowing authority into 2013, satisfying President Obama’s demand to avoid another showdown over the issue in the heat of the 2012 presidential campaign.”

As the details of the debt framework agreement began to take shape, the issue was the main topic on the Sunday morning talk shows, where Senate leaders and White House officials discussed the key parts of the developing plan.

This FarmPolicy overview from yesterday included a graphical summary of the emerging plan from Sunday’s Washington Post, as well as comments made yesterday by Senate Minority Leader Mitch McConnell (R-KY), Sen. Chuck Schumer (D-NY) (CNN- State of the Union program), and White House Advisor David Plouffe (NBC- Meet the Press program).

As the graphical summary illustrates, the emerging plan calls for the establishment of a special lawmaker committee (a bipartisan, bicameral group of 12 lawmakers) to identify additional budget savings in stage two of the overall budget agreement.

The analysis from the Senators and Mr. Plouffe indicated that one of the key negotiating points was the establishment of default budget “triggers.”  These “triggers” would kick in automatically if the newly established lawmaker committee could not come to an agreement on future cuts to federal spending.

Naftali Bendavid and Carol E. Lee reported in today’s Wall Street Journal that, “After weeks of partisan wrangling, President Barack Obama and congressional leaders reached a deal Sunday night to raise the government’s debt ceiling while cutting spending by about $2.4 trillion, avoiding a government default but setting the stage for months more of stormy debates over how Washington taxes and spends.”

The Journal writers explained that, “The deal would raise the debt ceiling by $2.4 trillion in two stages, and provide initially for $917 billion in spending cuts over 10 years. A special committee of lawmakers would be charged with finding another $1.5 trillion in deficit reduction, which could come through a tax overhaul and changes to safety-net programs.

If the committee doesn’t find at least $1.2 trillion in savings, or Congress doesn’t adopt its proposals, a pre-set array of spending cuts would kick in [the “triggers”], including cuts in military spending and Medicare payments to health-care providers.”

Today’s article added that, “For all the down-to-the wire drama, the deal leaves the hardest questions unanswered and sets in motion years of fiscal pain. It imposes spending caps for the next 10 years, but leaves the details of what programs would be cut to congressional committees.

“And it launches a ferocious, months-long argument over how to rewrite the tax code and what changes to make in popular programs like Social Security and Medicare—issues that were ultimately shelved in this debate.

So while one uncertainty would be lifted from the economy with the increase in the debt ceiling, others would be prolonged.”

And the Journal writers indicated that, “A congressional ‘super-committee’ of six Democrats and six Republicans will be charged with finding additional deficit reduction by Nov. 23. They are expected to come mostly from changes to entitlement programs like Social Security and Medicare, and from a sweeping tax overhaul.

If the committee fails to act, or if Congress refuses to adopt its proposals by Dec. 23, an array of prearranged cuts would kick in.

The nature of that backup package of cuts, or ‘trigger,’ was among the biggest sticking points. Negotiators settled on $1.2 trillion in cuts, of which half would be in defense spending and half in nondefense spending, including the payments to providers under Medicare. The cuts wouldn’t affect programs for low-income households, Social Security or Medicaid. None of the cuts would kick in until 2013.”

A summary of the agreement was released yesterday by the White House, as well as the Speaker’s office.

David Rogers reported last night at Politico that, “Much still depends on the success of a new joint committee charged with reporting back major savings to Congress before Thanksgiving. But for the second time this year, the president has had to yield ground on domestic appropriations, and the result is a real change in the direction and ambitions of government.”

And Humberto Sanchez reported today at Roll Call Online that, “A 12-member, bipartisan, joint Congressional committee would be charged with identifying the remainder of the deficit reduction measures and making a recommendation by Thanksgiving. Both the contentious issues of revenue raisers and entitlement reform would be under consideration.”

Robert Pear reported in today’s New York Times that, “The special committee would have to report legislation by Nov. 23. The deal establishes expedited procedures intended to ensure an up-or-down vote on the legislation, without amendments, by Dec. 23.”

As far as getting the agreement through Congress, Carl Hulse and Helene Cooper reported in today’s New York Times that, “Even as the president was speaking from the White House on Sunday night, Speaker John A. Boehner was on a conference call with House Republicans, trying to sell them on the proposal he had signed off on only minutes before.

“Since he is likely to lose the most conservative elements of his rank and file, Mr. Boehner faces the task of framing the pact as friendly enough to Republican principles to win over a significant group of House Republicans without alienating Democrats he will need to push it over the top.”

“At the same time, Representative Nancy Pelosi of California, the former speaker and current Democratic leader, was noncommittal about the plan, suggesting that Democrats might not rally behind it. ‘I look forward to reviewing the legislation with my caucus to see what level of support we can provide,’ she said in a written statement.”

The Times article added that, “The Senate seemed an easier sell. Senator Mike Johanns, Republican of Nebraska, said that from the terms of the deal described to him, ‘I think I will be satisfied and supportive.’ After years of work, he noted, Congress has become ‘serious about cuts in spending.’”

The Washington Post, Wall Street Journal and New York Times all ran editorials on the budget agreement in today’s papers.

***

With respect to agricultural spending, DTN Political Correspondent Jerry Hagstrom reported on Fridaybefore the debt framework was agreed upon, that, “The battle over a bill to raise the debt ceiling is still fluid in the House and the Senate today, but Senate Agriculture Committee Chairman Debbie Stabenow claimed an initial victory Thursday in the budget proposal by Senate Democratic leaders to cut farm spending by $11 billion over 10 years.

Stabenow, D-Mich., said she convinced Senate Majority Leader Harry Reid, D-Nev., to hold the farm cuts in his proposal to $11 billion when others had argued for a cut as large as $30 billion and the House had proposed $48 billion in cuts.

“‘I made a strong case to the leader that the farm budget had already taken cuts,’ Stabenow told reporters after a hearing. ‘I was able to keep that at $11 billion. I want it to go down, not up.’”

The DTN article noted that, “She added that she believes the debate over farm spending should be ‘between $11 billion and zero,’ noting that the Simpson-Bowles presidential commission had called for a $10 billion cut in agriculture and that the Gang of Six senators’ proposal called for the $11 billion cut.

“The Reid plan would cut the direct payments that crop farmers get whether prices are high or low between 2012 and 2021.”

The Reid plan would accomplish a $11 billion cut over 10 years by reducing the portion of acreage to calculate direct payments to 59 percent [from 85 percent, a 30 percent cut]. The proposal would cut $2 billion from the crop year 2012 payments, which would show up as budget savings in 2013 and $1 billion in each year, according to a CBO chart released Wednesday.”

Nonetheless, given the broad mandate contained in yesterday’s budget agreement for establishing future spending cuts and tax reforms- via the 12 member congressional “super-committee”- it remains unclear if [what] agricultural programs beyond direct payments will be revisited [looked at] for additional budget savings in the coming weeks.

In other Farm Bill related news, Mihir Zaveri reported on Saturday at The Oregonian Online that, “Predictions of more extreme weather fueled by climate change seem to make insurance a safe bet. But crop insurance is possible only with federal government support. And as a Congress intent on slashing budgets begins the debate on the 2012 farm bill, the swollen deficit makes the insurance subsidy a possible target. Many critics, from academics to politicians, see crop insurance as an expensive problem that encourages big businesses that don’t need government support. But this year, again, insurance will be a lifeline.

“For [Aaron] Schumacher, one look at the green beans tells him insurance just makes good sense.

“‘I can work 15 hours a day, seven days a week,’ he says, ‘but it isn’t going do me any good if my crops are ruined.’”

The article added that, “In June, Risk Management Agency Director William Murphy testified before Congress in support of crop insurance, pointing to flooding and severe drought as proof that the insurance program is greatly needed. ‘In years like this one, the value of this critical safety net is made clear.’

“Proponents say the program isn’t a handout like other subsidies; it’s a partnership.

“‘A wonderful marriage of some government oversight and government regulation and private companies and private individuals administering it on a local level,’ says Craig Reeder, chief financial officer of Echo-based Hale Farms, which has insured its crops for about a decade.”

 

Agricultural Economy

On Friday USDA’s National Agricultural Statistics Service released its monthly Agricultural Prices report which stated that, “The corn price, at $6.46 per bushel, is up 8 cents from last month and $2.97 above July 2010 [related graph], The soybean price, at $13.40 per bushel, increased 20 cents from June and is $3.61 above July 2010 [related graph]; and, “The July all wheat price, at $7.18 per bushel, is down 22 cents from June but $2.69 above July 2010 [related graph].”

Nathan Phelps reported yesterday at the Green Bay Press Gazette Online that, “Prices have been looking up for dairy farmers this summer, helping make headway on some of the savings and equity lost in 2009 and 2010, when prices plummeted and many farmers stretched to keep operations afloat.

“While prices are strong this year — and some predict they will remain that way for the foreseeable future — there’s still an abundance of caution among producers who have become accustomed to a wildly fluctuating markets over the past decade.”

Bloomberg news reported late last week that, “China, the second-biggest corn consumer, may boost imports of the grain to a record 6 million metric tons in the year beginning Oct. 1 to replenish stockpiles and as demand for feed grows, according to Yigu Information Consulting Ltd.”

Meanwhile, the recent edition of Choices Magazine included a section on farmland values; the articles on farmland values were summarized in this overview article.

And the PBS NewsHour Online took a closer look at the ongoing drought in parts of the U.S. on Thursday in an update titled, “NewsHour Connect: Heat Wave Imperils Midwest Agriculture.”

Also, AP writer Sean Murphy penned an interesting article in today’s Washington Post related to the heat issues, titled, “Heat wave heightens isolation for rural elderly.”

The article stated that, “The air is cool in Ray Knight’s makeshift coffee shop on the main strip in this tiny northern Oklahoma farming community, but there aren’t many customers.

“With temperatures topping 100 degrees, the elderly farmers and retirees who Knight said like to gather and ‘swap lies’ are nowhere to be seen. They’re also probably not at their doctor’s appointments, shopping at the store or at their club meetings. Many are afraid to go outside.

The heat wave scorching the Great Plains has turned many rural communities into virtual ghost towns for the past month, and also heightened a sense of isolation among the elderly residents who make up much of their population these days. The relentless stretch of 100-degree days, which began unusually early this year and could run for weeks longer, is making their way of life difficult and even dangerous, thwarting their routines for getting the supplies and health care they need.”

Keith Good