FarmPolicy

September 1, 2014

The “Fiscal Cliff;” and the “Dairy Cliff”

Farm Bill, Policy Issues

Sean Lengell reported last week at The Washington Times Online that, “A multiyear farm bill that has stalled in Congress could be part of a solution to avoid the looming ‘fiscal cliff’ — if party leaders decide they need its spending cuts to count toward an overall deficit reduction package.”

The article noted that, “Some agriculture programs, such as crop insurance, have continued under a separate authorization. And funding for the food stamp program was included in a six-month stopgap bill to fund the federal government that Congress passed in September.

But some dairy farmers say they’re already feeling a pinch, as the Department of Agriculture’s Milk Income Loss Contract Program, which compensates dairy producers when domestic milk prices fall below a specified level, expired after Sept. 30.”

More specifically, J.T. Rushing reported on Friday at The Gazette (Cedar Rapids, Iowa) Online that, “As if the ‘fiscal cliff’ and the long-suffering farm bill weren’t enough, Iowans may soon face a new dilemma — a ‘dairy cliff.’

“If Congress fails to act in the handful of weeks it has left in its lame-duck session before adjourning for Christmas recess, the nation’s dairy programs for farmers will expire Jan. 1.

“The effects won’t be limited to the dairy industry — retail prices for all sorts of dairy-related products could soar. U.S. Secretary of Agriculture Tom Vilsack has predicted the price of milk could rise to $6 a gallon, just as almost all Americans’ income taxes are scheduled to increase.”

The article explained that, “Iowa farmers have been largely shielded from the effects of the farm bill’s expiration on Oct. 1, since the bill was written to apply to crop years, not calendar years, giving Congress until roughly next spring to renew the bill. But dairy programs have long been an exception in the farm bill and expire months earlier.”

Rushing added that, “The possibility of a chaotic dairy industry is so possible that Rep. Collin Peterson of Minnesota, the top Democrat on the House Agriculture Committee, said in an interview this month that Republican obstruction to renewing dairy programs could force milk price supports to $38 per hundredweight, up from the current price of about $22.

“‘If they are going to dilly-dally around and not get this thing done, I am ready for $38 milk on Jan. 1,’ Peterson told AgriTalk radio.”

Gannett writer Malia Rulon Herman reported on Wednesday that, “Democratic Sen. Max Baucus of Montana is making a renewed push for the farm bill and other programs important to rural Americans, even as President Barack Obama and congressional leaders negotiate a deal to avoid the ‘fiscal cliff’ of spending cuts and tax increases.

“As chairman of the Senate Finance Committee, Baucus could influence a final deal. He said he will push for priorities such as abolishing the estate tax and protecting rural hospitals.”

The article added that, “Baucus hopes the farm bill comes into play as lawmakers look for ways to cut spending. That’s because the farm bill that passed the Senate earlier this year would reduce the deficit by $23 billion while overhauling farm programs.

“‘We’re part of the solution here,’ Baucus said. ‘It’s the kind of approach that must be taken to solve the fiscal cliff. The farm bill is an example of both parties working together.’”

Meanwhile, the House floor schedule this week, released by Majority Leader Eric Cantor (R., Va.), is available here.

On a separate issue, the AP reported on Friday that, “House Republicans still smarting from their poor showing among Hispanics in the presidential election are planning a vote on immigration legislation that would expand visas for foreign science and technology students and make it easier for those with green cards to bring their immediate families to the U.S.

Republican leaders have made it clear they’re ready to get serious about overhauling the nation’s immigration system, a top priority for Hispanic communities. Taking up the immigration bill during the lame-duck session could be a first step toward that commitment.”

 

Budget Issues, Senate Rules

Lisa Mascaro reported in Friday’s Los Angeles Times that, “When Republicans in Congress say they are willing to put tax revenues on the table in budget talks with President Obama, that offer obscures a divide within their ranks that could thwart a year-end fiscal compromise.”

“Without explicitly drawing lines, House Speaker John A. Boehner (R-Ohio) has acknowledged that some revenues must be part of any deal if his party expects Democrats to compromise on the other end of the ledger — with cuts to Medicare and other entitlement programs,” the article said.

Ms. Mascaro added that, “The definition of ‘revenues’ will prove key in the weeks ahead.”

Lori Montgomery reported in today’s Washington Post that, “Neither side gave ground in an opening round of staff-level talks last week at the Capitol. As President Obama and congressional leaders prepare for a second face-to-face meeting as soon as this week, the divide over taxes presents the biggest obstacle to replacing the heap of abrupt tax hikes and spending cuts, set to hit in January, with a less-traumatic debt-reduction plan.

“People in both parties are exploring ideas for bridging the gap. Without a deal on taxes, there is not much hope for agreement on a broader strategy for restraining the national debt that also tackles the skyrocketing cost of federal retirement programs such as Social Security and Medicare.”

Janet Hook and Damian Paletta reported in today’s Wall Street Journal that, “Inconclusive talks among high-level aides have done more to define the differences between the two parties than bridge them, according to people in both parties. Republican leaders have agreed to boost tax revenue by capping deductions rather than raising rates. And senior Democrats have agreed to modest changes to programs such as Medicare. Each side has resisted ceding too much ground and views their adversaries’ concessions as inadequate.”

Matt Vasilogambros reported yesterday at National Journal Online that, “Several congressional Republicans bucked Americans for Tax Reform President Grover Norquist and his anti-tax pledge on Sunday, saying that GOP lawmakers will have to keep their options open in order to strike a deal that averts the fiscal cliff.

“Sen. Lindsey Graham, R-S.C., said he will not give way to raising tax rates, but he also said Republicans need to be open to increasing government revenues.”

The National Journal update noted that, “Last week, Sen. Saxby Chambliss, R-Ga., told a local television station that he is more worried about the fiscal cliff than he is about adhering to the pledge, prompting a response from Norquist, Politico reported.

“Rep. Peter King, R-N.Y., echoed these sentiments, saying times have changed since he first signed the pledge.”

The Washington Post editorial board pointed out yesterday that, “Compromise is essential for political reasons; with Republicans controlling the House and Democrats the White House and Senate, there’s no alternative. But more to the point: Compromise is essential to make the numbers work. If you don’t raise taxes to some extent, you have to make intolerably deep cuts to Medicare, Medicaid, Social Security and the other entitlement programs that make up 60 percent of the federal budget. If you don’t make any cuts to those programs, you have to raise taxes to levels that no one could support.”

Meanwhile, gasoline taxes, the U.S. debt limit, unemployment benefits, and perspectives from state governments are also variables that have crept into the “fiscal cliff” debate.

Estate tax issues continue to be a significant concern for agricultural groups.

In addition, Manu Raju reported yesterday at Politico that, “A partisan war is brewing that could bring the government to a screeching halt as early as January — and no, it’s not over the fiscal cliff.

It’s all about the filibuster.”

The article added that, “Democrats are threatening to change filibuster rules, in what will surely prompt a furious GOP revolt that could make those rare moments of bipartisan consensus even harder to come by during the next Congress.

“Here’s what Senate Majority Leader Harry Reid is considering: banning filibusters used to prevent debate from even starting and House-Senate conference committees from ever meeting. He also may make filibusters become actual filibusters — to force senators to carry out the nonstop, talkathon sessions.”

For more on Senate procedure and process, see this article from yesterday’s New York Times: “The Senate’s Long Slide to Gridlock.”

 

Regulations

The Wall Street Journal editorial board opined on Saturday that, “President Obama’s hyperactive regulators went on hiatus in 2011 to get through Election Day. Now with his second term secure, they’re about to make up for lost time and then some.

“The government defines ‘economically significant’ rules as those that impose annual costs of $100 million or more, and the Bush, Clinton and Bush Administrations each ended up finalizing about 45 major rules per year. The average over Mr. Obama’s first two years was 63 but then plunged to 44 for 2011 and 2012 so far. The bureaucracies didn’t slow down. They merely postponed and built up a backlog that is about to hit the Federal Register.

“We’d report the costs of the major-rule pipeline if we had current data. But the White House budget office document known as the unified agenda that reveals the regulations under development hasn’t been published since fall 2011.”

DTN writer Todd Neeley reported last week (link requires subscription) that, “EPA has asked a California court to dismiss a lawsuit that could ultimately affect the usage of hundreds of pesticides and other agriculture chemicals as they relate to endangered species, nearly two years after a number of environmental groups challenged EPA.

“EPA said the suit did not identify specific agency actions in the course of registering ag chemicals that adversely affected endangered species, according to the motion filed Nov. 16 in the U.S. District Court for the Northern District of California in San Francisco. The court has scheduled a hearing for Feb. 15, 2013.

“The court’s previous stay on the case essentially froze legal action while the environmental groups and agriculture groups were in settlement negotiations. That stay expired Nov. 1.”

Mr. Neeley pointed out that, “EPA argues in its motion that Endangered Species Act requirements are triggered only by ‘affirmative agency actions’ that may affect listed species or ‘designated critical habitat.’

“One of the criticisms of the CBD [Center for Biological Diversity] lawsuit has been the complaint cites no specific evidence that pesticides and other chemicals are hurting threatened or endangered species.”

 

Agricultural Economy

Tiffany Hsu reported in Saturday’s Los Angeles Times that, “Retail beef and veal prices are projected to rise 5.5% to 6.5% this year, more than previously estimated, after a scorching summer drought in the Midwest seared through crops used for livestock feed.

“Next year, the meat will cost consumers 3% to 4% more – but that’s less than the USDA previously forecast. Steak in October cost 4.6% more than it did during the same month last year.

Across the board, food costs in the U.S. will have boomed as much as 3.5% this year, with as much as a 4% jump anticipated for next year. Last year, prices ballooned 3.7% after ticking up 0.8% in 2010.”

The article noted that, “Poultry prices – including for recently devoured Thanksgiving turkeys – will swell up to 6% this year and an additional 4% next year.”

Bloomberg writer Elizabeth Campbell reported on Friday that, “Cattle futures extended a rally to a record amid shrinking supplies of U.S. beef and increasing demand for the meat as grocers boost purchases before the Christmas holiday.

“U.S. commercial beef output in the 10 months through Oct. 31 fell 1.1 percent from the same period in 2011, the government said in a report today. The herd as of July 1 shrank to the smallest since at least 1973. Ranchers culled herds after the worst drought since 1956 eroded crop yields, sending corn, the main ingredient in feed, up as much as 68 percent since mid- June.”

Bob Tita reported in Friday’s Wall Street Journal that, “Deere & Co. said Wednesday that orders for its farm machinery remain strong, dispelling fears that weak economic conditions and this summer’s U.S. drought would damp demand…[D]eere said harvesting combines are sold out for the company’s first and second quarters and dealers are already reserving third-quarter production slots. Crop sprayers also are nearly sold out for the year and production of high-horsepower tractors is booked into the spring, even with the addition of more production capacity.”

And, the AP reported on Friday that, “The Army Corps of Engineers on Friday began reducing the flow from a Missouri River reservoir, a move expected to worsen low-water conditions on the Mississippi River and potentially bring barge traffic to a halt within weeks.”

Also, Jane Perlez reported in last week’s New York Times that, “Ten Southeast Asian nations said Tuesday that they would begin negotiating a sweeping trade pact that would include China and five of the region’s other major trading partners, but not the United States.

“The proposal for the new trade bloc, to be known as the Regional Comprehensive Economic Partnership, is enthusiastically embraced by China. The founding members, who belong to the Association of Southeast Asian Nations, said at the close of the association’s summit meeting here that the bloc would cover nearly half of the world’s population, starting in 2015.

“The new grouping is seen as a rival to a trade initiative of the Obama administration, the 11-nation Trans-Pacific Partnership, which includes many of the same countries but excludes China.”

Jack Ewing reported in today’s New York Times that, “A free-trade agreement between the United States and Europe, elusive for more than a decade but with a potentially huge economic effect, is gaining momentum and may finally be attainable, business and political leaders say.

“Arduous negotiations still lie ahead, but if technical hurdles can be overcome, supporters of a pact argue, it could rival the North American Free Trade Agreement in scale and be a cheap way to encourage growth between the European Union and the United States, which are already each other’s biggest overseas trading partners.”

The Times article noted that, “While China has dominated the political debate in the United States, U.S. trade with Europe is much larger, totaling $485 billion in goods in the first nine months of this year, compared with $390 billion in trade with China.

“Perhaps more important for U.S. companies, Europe buys much more from the United States than China does. U.S. exports of goods to Europe through September totaled $200 billion, according to U.S. government data, while China imported $79 billion worth of U.S. goods.”

 

EU- Farm Policy Issues

Bloomberg writers James G. Neuger and Svenja O’Donnell reported on Friday that, “European Union leaders failed to agree on the 27 nation bloc’s next seven-year budget, replaying the clash between rich and poor countries that has stymied the response to the euro debt crisis.”

While James Kanter and Andrew Higgins reported in Saturday’s International Herald Tribune that, “The budget, which amounts to about 130 billion euros per year, goes mostly to subsidize farmers and support regional projects in poorer member states, policies that were originally intended to help bind Europe together and mute the economic discord that in the past fueled antagonisms that led to bloody wars.”

A recent editorial from The Economist indicated that, “Contrasting attitudes to farming have dogged the European project at least since Britain joined in 1973, through budget rows and wider clashes between protectionists and free-traders. As European Union leaders began their latest budget fight at a summit on November 22nd, one thing was certain: the EU will go on spending disproportionate sums on farmers. Yet, at a time of harsh domestic austerity, it can ill-afford the extravagance of the common agricultural policy (CAP). Worse, the CAP favours big producers over small ones, and rich western countries over poor eastern ones.”

Keith Good

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