Farm Bill: President Obama’s Deficit Reduction Plan- General Overview
Zachary A. Goldfarb reported in today’s Washington Post that, “President Obama made a defiant call on Monday for $1.5 trillion in new taxes as part of a plan to find $3.2 trillion in budget savings over the next decade, issuing his most detailed proposal yet to tame the soaring federal debt.
“Abandoning earlier compromises, Obama adopted a posture that cedes far less ground in cutting the nation’s social safety net and demands much more in terms of new levies on millionaires, other wealthy Americans and some industries.
“The proposal drew an angry response from key Republicans, underscoring the considerable opposition to his plan on Capitol Hill as a special bipartisan committee on deficit reduction ramps up its work in coming weeks.”
Carol E. Lee and Naftali Bendavid reported in today’s Wall Street Journal that, “Mr. Obama’s position, laid out as he announced a new plan to cut deficits by $3.6 trillion over 10 years, increases the challenges for a congressional supercommittee to reach a deficit-cutting deal by Thanksgiving because Republican leaders have ruled out tax increases. But it rallied the Democratic base ahead of the president’s re-election battle next year.”
“Mr. Obama formally asked the committee to include the costs of his $447 billion jobs bill in its final agreement, which would further complicate the panel’s mission of finding deficit savings,” the Journal said.
And Jackie Calmes reported in today’s New York Times that, “With a scrappy unveiling of his formula to rein in the nation’s mounting debt, President Obama confirmed Monday that he had entered a new, more combative phase of his presidency, one likely to last until next year’s election as he battles for a second term.”
The New York Times editorial board described the President’s plan as “a well-proportioned mix,” while the Washington Post editorial board indicated that, “Compared to what’s necessary in terms of long-term debt reduction, and in particular compared to the savings outlined by his debt-reduction commission, better known as Simpson-Bowles, the plan falls short.”
The editorial board at The Wall Street Journal stated today that: “It is all about re-election politics. Down in the polls and facing a sullen liberal base, Mr. Obama wants to rally the left behind him, and nothing fires them up like the pretense that government is sticking it to the rich. Mr. Obama is picking a tax fight that he apparently believes will carry him to re-election next year.”
And Lori Montgomery reported in today’s Washington Post that, “President Obama projects that his new plan for reducing the federal debt will save more than $3 trillion over the next decade by raising taxes on the wealthy and slashing spending on a host of government programs, from farm subsidies to federal worker pensions.
“But independent budget experts said the blueprint that Obama unveiled Monday — which White House officials say would save more than $4 trillion when added to earlier budget deals this year — appears to fall short of his target. The plan also relies on an array of well-worn budget ploys that do little to advance the cause of bipartisan cooperation in taming the nation’s spiraling debt, the experts said.”
President’s Deficit Plan: Agricultural Provisions
Chris Clayton reported yesterday at DTN that, “The $4 trillion savings plan offered Monday by President Barack Obama eliminates direct payments [related White House Blog update] and significantly cuts taxpayer subsidies for crop insurance over the next decade.”
The DTN article stated that, “The White House stated a net savings of $33 billion would come from agricultural programs over 10 years. The plan proposes eliminating direct payments to save $30 billion, as well as $8.3 billion in cuts to crop insurance. Another $2 billion would be saved in conservation. That’s $40.3 billion in total cuts to agriculture programs, but the plan also extends the Supplemental Revenue Assistance (SURE) program through 2016, which negates some of the savings.
“In its recommendations, The White House noted the agriculture sector is doing well economically compared to other parts of the economy. Income in 2011 is forecast at $103.6 billion, up $24.5 billion from 2010, ‘the highest inflation-adjusted value for net farm income in more than 35 years.’”
The President’s proposal stated on page 18 that, “In 2010, the U.S. Department of Agriculture (USDA) and the crop insurance companies agreed to changes that saved $6 billion over 10 years from administrative expense reimbursement and underwriting gains while also improving service to underserved States. The Administration believes there are additional opportunities for streamlining of the administrative costs of the program.”
Mr. Clayton noted in his DTN article from yesterday that, “The crop insurance industry already took a $6 billion cut in the growth of spending over 10 years as part of a new standard reinsurance agreement with USDA. There was significant grumbling at the time, but the agreement showed the agricultural community was willing to take cuts. Insurers and supporters on Capitol Hill have used that contract to show the crop-insurance industry has already taken a cut.
“Participation in crop insurance has soared since 2000, according to the White House, with a participation rate of 83%. Right now, the federal government pays more than 50% of a producer’s actual policy premium. The president calls for shaving two basis points off any premium subsidies that are currently offered above 50%, saving $2 billion over 10 years. Farmers who have premium subsidies of 50% or less would not be affected.
“A USDA spokesman stated in an e-mail this language on shaving basis points means a 56% premium subsidy would be cut back to 54%.”
The article also pointed out that, “Crop insurers’ rate of return on investment should be around 12%, the White House stated, but is expected to be closer to 14%. The administration wants to go after that 2-percentage-point difference and lower the insurers’ return on investment to 12%, which the administration states would save another $2 billion over 10 years.
“The administration also wants to lower the cap for administrative and operating expenses USDA pays insurers implementing the program. The current cap is based on 2010 premiums, ‘which were among the highest ever.’ The White House proposes lowering the administrative-expenses payout to companies based on 2006 premium levels, before the current spike in higher commodity prices raises the administrative and operating expenses dramatically. The administration wants to set a cap at $900 million, then adjust annually for inflation. Such a plan would save $3.7 billion in administrative and operating expenses payout over 10 years.”
A joint news release yesterday from House Agriculture Committee Chairman Frank Lucas (R-OK), and Senate Agriculture Committee Ranking Member Pat Roberts (R-KS) stated in part that, “The agriculture community remains willing to do its part in getting our fiscal house in order, but, in essence, President Obama’s plan for economic growth and deficit reduction is not credible.
“The President’s policy priorities reveal a lack of knowledge of production agriculture and fail to recognize how wholesale changes to farm policy would impact the people who feed us. For example, cutting $8 billion from the crop insurance program puts the entire program at risk…And, the President does nothing to address waste, fraud, abuse, and other integrity issues within nutrition programs, which account for 80 percent of USDA spending.”
A joint statement yesterday from the American Association of Crop Insurers, the Crop Insurance Professionals Association, the Crop Insurance and Reinsurance Bureau, the Independent Insurance Agents & Brokers of America, and the National Association of Professional Insurance Agents indicated that:
“On behalf of crop insurance companies, agents, and producers who have stated that federal crop insurance is the cornerstone of US farm policy, we strongly oppose the Administration’s reckless cuts to crop insurance. The Administration’s proposal does not ‘modernize’ crop insurance or implement it ‘more efficiently,’ as it purports to do. To be clear, the Administration proposal would end federal crop insurance. Given the bad economy, high unemployment, recent deep cuts, and widespread natural disasters, the Administration proposal is divorced from reality and is an attack on rural America.”
Tom Zacharias, the President of National Crop Insurance Services, noted in a statement yesterday that, “The [President’s deficit] plan is devastating to those in agriculture, particularly in a year that has seen extremely volatile commodity prices and weather events — from droughts in Texas and Oklahoma to floods in the Northeast and Midwest.
“The White House calls for further streamlining of the Federal Crop Insurance Program, which has already contributed more than $4 billion towards deficit reduction, and $12 billion overall in spending reductions since 2008. Congress needs to evaluate the economic impact of weakening the primary safety net on which farmers and our rural economy can rely.”
National Corn Growers Association President Bart Schott indicated yesterday that, “While NCGA agrees the fiscal challenges before us require even greater efficiency in the delivery of farm safety net programs, we are deeply concerned by proposals that would directly undermine a farmer’s ability to purchase adequate insurance coverage at a time of heightened volatility in commodity markets.
“In addition, NCGA recently unveiled the Agriculture Disaster Assistance Program (ADAP), a plan that transfers a significant portion of direct payments for deficit reduction, with the remaining funds put toward an improved risk management program that better complements federal crop insurance.”
Iowa GOP Senator Charles Grassley stated in part yesterday that, “The President’s proposal is full of gimmicks,” and Sen. Mike Johanns (R-Neb.) noted that, “The President’s latest proposal may poll well with his political base, but many of the twice-baked ideas lack support in Congress even from his own party.”
Meanwhile, an update posted yesterday at the Southeast Farm Press stated that, “National Cotton Council Vice-Chairman Chuck Coley, a Vienna, Ga., producer, joined American Cotton Producers Chairman Jimmy Dodson, a Robstown, Texas, producer, in meetings with members of the House and Senate agriculture committees in Washington, D.C., to discuss the NCC’s upland cotton policy proposal approved at the mid-year meeting of the Council’s Board of Directors.
“The new policy addresses expected reductions in the agricultural budget baseline arising from deficit reduction efforts. Additionally, the new policy proposal is intended to address the findings in the long-standing trade dispute with Brazil.”
In other developments, a recent news release from the International Dairy Foods Association stated that, “A new study of the impacts of proposed dairy policy legislation on federal nutrition programs has found millions of dollars in hidden costs. Behind typical estimates of the price of the National Milk Producers Federation’s Foundation for the Future dairy policy proposal are large and unintended additional taxpayer costs, reductions in the effectiveness of federal nutrition programs, and reduced access to the programs for low-income women and children.”
And Fernanda Santos reported in today’s New York Times that, “The federal government is making school meals more nutritious this year, but also more expensive.
“Under a little-noticed provision of the child nutrition bill signed by President Obama in December, which brought more fresh produce and less whole milk to cafeterias nationwide, school districts are required to start bringing their prices in line with what it costs to prepare the meals, eventually charging an average of $2.46 for the lunches they serve.”
David M. Drucker reported yesterday at Roll Call Online that, “The Senate cleared a procedural hurdle today on legislation considered crucial to winning Democratic support for trade agreements with Colombia, Panama and South Korea, thanks in part to overwhelming support from Republicans.
“The GOP ignored opposition to the Trade Adjustment Assistance measure from two prominent conservative advocacy groups, the Club for Growth and Heritage Action for America, which announced earlier in the day that they opposed the legislation.”
The update added that, “With 60 votes required to move to the legislation, the final tally came in at 84-8, including close to three dozen Republicans who voted to end a filibuster on the key procedural motion.
“President Barack Obama has yet to submit the free-trade agreements to Congress for ratification, in part because of Republican resistance to TAA…Once it clears the Senate, possibly later this week, the TAA measure would then go to the House. It remains unclear whether the needed GOP support will materialize, although some House Republicans have previously signaled their willingness to support the measure.”
Reuters writer Suzi Parker reported on Sunday that, “Cooler weather has arrived in Arkansas but a severe drought lingers, bringing bad news for the state’s hay and cattle producers.
“The Climate Prediction Center recently issued a three-month outlook that showed drought persisting or worsening into eastern Arkansas. That means areas that were flooded in the spring now could face drought conditions.”
Dan Piller reported yesterday at the Green Fields Blog (Des Moines Register) that, “The hard freeze that struck Iowa last week caused the percentage of Iowa’s corn and soybean crops rated good to excellent by the U.S. Department of Agriculture declined slightly for the week ending Sunday.
“‘Parts of Iowa received a hard freeze this week with frost reported over most of the State,’ the USDA reported.
“Fifty-five percent of the corn crop was rated good to excellent, down from 57 percent a week ago. For Iowa’s soybeans, the good to excellent rating covered 62 percent of the crop, down from 64 per cent a week ago.”
Mr. Piller pointed out that, “Nationally, the good to excellent rated corn fell from 53 percent of the crop to 51 percent in the last week, the USDA said. Soybeans rated good to excellent dropped from 56 percent last week to 53 percent.”
Linda H. Smith reported yesterday at DTN (link requires subscription) that, “Farmers remain optimistic about the ag economy, although cautiously so, according to the latest DTN/The Progressive Farmer Agriculture Confidence Index.
“The survey, which tracks farmer attitudes about the current economic climate and their expectations for the future, still shows values in positive territory, though there is a modest deflation in attitude.”
The DTN article added that, “The most recent DTN/Progressive Farmer survey of 500 producers resulted in an overall Confidence Index of 108, vs. 111 in spring. Numbers above the 100 level are deemed positive, below 100 indicate a pessimistic mood.”
Ben Geman reported yesterday at The Hill’s Energy Blog that, “President Obama’s advisers will recommend that he veto pending House legislation that would block two key Environmental Protection Agency air-pollution rules, a White House official said.”
Mr. Geman explained that, “The House is slated to vote later this week on a GOP-led measure that would mandate new interagency analyses of the cumulative economic effects of several EPA rules.
“The bill would delay completion of upcoming mercury standards for power plants until at least six months after the interagency panel’s final report in August of 2012.
“It would also delay a recently finalized EPA rule to cut power plant emissions that blow across state lines and worsen smog and particulate pollution, a measure called the Cross-State Air Pollution Rule.”
The Hill update added that, “The White House threat to veto the bill — called the ‘Transparency in Regulatory Analysis of Impacts on the Nation (TRAIN) Act’ — is the latest signal from the administration that it will battle GOP efforts to scuttle a suite of EPA rules.”