FarmPolicy

September 22, 2014

Farm Bill- Budget Issues; and, Trade

Farm Bill –Budget Issues

Jonathan Weisman explained in yesterday’s New York Times that, “For all the growing angst over the state of negotiations to head off a fiscal crisis in January, the parties are farthest apart on a relatively small part of the overall deficit reduction programthe down payment.

President Obama and the House speaker, John A. Boehner, are in general agreement that the relevant Congressional committees must sit down next year and work out changes to the tax code and entitlement programs to save well more than $1 trillion over the next decade.

“But before that work begins, both men want Congress to approve a first installment on deficit reduction in the coming weeks. The installment would replace the automatic spending cuts and tax increases that make up the ‘fiscal cliff,’ while signaling Washington’s seriousness about getting its fiscal house in order. That is where the chasm lies in size and scope.”  (This two-step compromise was explained in greater detail in this New York Times article from Nov. 17.)

Mr. Weisman added yesterday that, “Mr. Obama says the down payment should be large and made up almost completely of tax increases on top incomes, partly because he and Congressional leaders last year agreed on some spending cuts over the next decade but have yet to agree on any tax increases.

“Republicans have countered by arguing for a smaller down payment that must include immediate savings from Medicare and other social programs. Republicans, using almost mirror-image language, have said that they do not want to agree to specific tax increases and vague promises of future spending cuts.

“Senator Kent Conrad of North Dakota, chairman of the Budget Committee and part of a bipartisan ‘Gang of Six’ senators who devised the two-stage process, said: ‘I think there’s a lot of confusion between the initial down payment and the framework. That’s for sure.’”  (The New York Times published this graphical illustration in yesterday’s paper comparing the initial budget offers from the President and the GOP (click on graph for larger view) and note that Sen. Conrad was on MSNBC yesterday discussing the budget situation, video replay here).

More specifically to farm policy, Reuters writer Charles Abbott reported earlier this week that, “As time runs out to pass a new U.S. Farm Bill in 2012, the White House and Republicans in the House of Representatives hold surprisingly similar goals about how much to cut spending – roughly from $32 billion to $35 billion.

“But getting to a final agreement is proving difficult. Each side agrees to significant cuts to farm subsidies and soil conservation, but they have diametrically different views on food stamps, which the White House refuses to cut.”

Mr. Abbott explained that, “Both sides would eliminate the $5 billion-a-year direct-payment subsidy, also a top target of reformers. And they would reduce funds for conservation.

“The near-agreement on the size of cuts is obscured by infighting over funding for food stamps and how broadly to rewrite the farm program, a small-farm activist said on Monday.”

The Reuters article noted that, “The White House would cut crop subsidies, crop insurance and conservation but not food stamps for the poor…[I]n its proposal, the White House said it would save $7.5 billion on crop insurance over 10 years, $30 billion by ending the direct payment and $2 billion on conservation. It would use some of the savings to pay for disaster-relief programs.

On Monday, House Republican leaders suggested budget cuts patterned on an unsuccessful 2011 budget reform commission on top of automatic spending cuts scheduled to take effect in January. The automatic cuts would trim farm programs by as much as $10 billion. The commission’s plan suggested $10 billion in cuts and cited farm subsidy, conservation and export promotion programs as potential targets.”

(Recall that the GOP counter proposal from Monday also noted that, “If we were to take your Administration’s proposal at face value, then we would counter with the House-passed Budget Resolution.”  The SNAP portion of the House-passed Budget Resolution contained significant reductions that The New York Times editorial board railed against when the measure was passed back in March.   Reuters news noted back in March that under the budget plan, food stamps “would become a block grant to states with a limit on spending.”)

Steve Hargreaves reported yesterday at CNNMoney Online that, “Republicans and Democrats are still largely at an impasse over a deficit reduction plan to help avert the fiscal cliff. Could farm subsidies be part of the solution?

“Both House and Senate versions of the new farm bill already call for the elimination of one type of farm subsidy — direct payments to farmers, a program with a ten-year price tag of about $46 billion.”

The update explained that, “Yet even if the payments are eliminated, taxpayers won’t see all of the $46 billion in savings.

To maintain a social safety net for farmers, both the House and Senate versions of the farm bill increase support for other types of farm subsidies, such as government sponsored crop insurance.”

Yesterday’s update added that, “The food stamp program is the real lion in the farm bill — making up nearly 80% of its ten-year cost of nearly $1 trillion. Both the Senate and House bills call for modest cuts to food stamps…‘It doesn’t address the biggest source of farm bill spending,’ one GOP congressional aid said of the White House proposal. ‘$32 billion is not a substantial amount of money.’”

Meanwhile, House Ag. Comm. Chairman Frank Lucas (R., Okla.) was a guest on yesterday’s AgriTalk radio program with Mike Adams, where the conversation focused on Farm Bill issues.  An audio replay of yesterday’s interview can be heard here (MP3- 13:12), while an unofficial FarmPolicy.com transcript of the discussion can be found here.

Mike Adams asked Chairman Lucas: “We’re hearing that there could be an agreement, perhaps, between the White House and House Republicans on a total spending cut number, somewhere $32 to $35 billion. Is that accurate?”

Chairman Lucas noted that, “Mike, there’s all kinds of discussion going on at various points. I think the White House and the Speaker’s office are still, yes, focused on a grand number. And if you look out over a ten year period, that’s trillions of dollars. As far as the ag particulars, I don’t know that they have gotten that far down into the weeds to think about us yet. But it is my hope that if there is a grand number agreed to by the Speaker and the President, that in the parameters of whatever that grand number is, we’ll know with some certainty where we are in agriculture.”

Chairman Lucas added that, “But in a year like this, where there doesn’t seem to be much political oxygen left in the nation’s capital as December winds down, except towards the big deal, then if there’s a big agreement on taxes and sequestration spending cuts, then I would hope that we can be a component of that, a piece, a part of that circumstance, Mike. But right now everything is still in the air.”

When asked about the possibility of an extension, Chairman Lucas indicated that, “Some programs in different bills in this place are not funded with baseline. There’s about eight or nine billion dollars of spending set into motion in the 2008 Farm Bill that has no baseline. So even if you just extend the present language, you’ve got to come up with a way to address that baseline issue. And that’s one of the things that has to be considered, Mike.

“Also, even if you do a complete farm bill, even if we could get a number as a part of a big picture thing shortly, even if we work out—and it’s possible, yes, for the House and Senate to work out language based on whatever that agreed to number is—even if you put that in place, Mike, I still believe you’ve got to have a little bit of a transition period, some kind of a short-term extension, just to allow the law to be turned into rules and regulations, created into software, implemented. So there’s just a…this is a complicated chess game we’re part of here, so to speak.”

Also on yesterday’s AgriTalk program, Chairman Lucas noted that, “But there’s another issue, Mike, that’s important in sorting out this farm bill policy issue, and that’s do you have choice. The Senate bill uses as its primary safety net the shallow loss revenue program. We in the House, as passed in a bipartisan way in the Ag Committee, believe that that won’t work for everybody and that you’ve got to not only address revenue through some kind of an insurance mechanism, but you’ve also got to address price, so we want to give people a choice, in our version of the farm bill, when they sign up for the next five years, which way do they want to go. They’ve got to pick what’s best for them, best for their region, best for their crop. That’s still a major point.

“Now, I know there have been media reports that my good friend, the senior senator from Kansas, has shown much flexibility in this issue. I appreciate that greatly. But there’s still a lot of details in what choice really means.”

And this exchange occurred near the conclusion of yesterday’s interview- “Mr. Adams: As we let you go, let me ask you this. As of today, as of this moment, what’s your best guess at how this is going to play out?

“Rep. Lucas: If there is an agreement to prevent the tax increases and the military sequestration, we’ll be a part of it. I’m very worried that the President and the Speaker will not be able to address entitlements, there won’t be a big picture, we’ll go off the cliff. At that point you’ve got to have some kind of an extension. We have to maintain a safety net in the countryside. It’s not farmers’ and ranchers’ faults that this place is dysfunctional up here.”

David Rogers reported yesterday at Politico that, “The big four House and Senate farm bill leaders met Tuesday amid real signs of progress in resolving their differences over the commodity title.

“Senate Agriculture Committee Chairwoman Debbie Stabenow (D-Mich.) was described as ‘very positive’ about the direction taken in the talks. And perhaps more important, there were signals from the typically cautious House that a deal could be in the works.

“Apart from Stabenow, Tuesday’s meeting included Kansas Sen. Pat Roberts, her ranking Republican, and House Agriculture Committee Chairman Frank Lucas (R-Okla.) together with his ranking Democrat, Minnesota Rep. Collin Peterson.”

Mr. Rogers noted that, “And if a deal can be reached, one option would be to then wrap the final farm bill compromise into whatever deficit-reduction plan emerges from White House-Republican budget talks.”

Daniel Looker reported yesterday at Agriculture Online that, “Behind the scenes, the leaders of the House and Senate agriculture committees may already be working out differences between their two versions of a farm bill, Senator Chuck Grassley (R-IA), a member of the Senate committee, told reporters Tuesday.

He said he’s more optimistic about the farm bill’s chances than he was a week ago ‘because they’re actually talking,’ Grassley said.”

Also yesterday, a news release from the National Farmers Union (NFU) noted in part that, “[NFU] President Roger Johnson urged Congress and President Barack Obama to come to a balanced agreement that reduces the federal deficit and includes a five-year farm bill and an extension of the Production Tax Credit (PTC) for renewable energy.”

On a separate issue regarding SNAP, a news release yesterday from Sen. John Thune (R., S.D.) stated that, “Senators [Thune], Chairman of the Senate Republican Conference, and Jeff Sessions (R-Ala.), Ranking Member of the Senate Budget Committee, today sent a letter to Wendy Spencer, Chief Executive Officer of the Corporation for National and Community Service (CNCS), a government entity responsible for matching volunteers with local community service organizations. The letter outlines Thune and Sessions’ concerns that current CNCS policies and promotional materials may encourage the exploitation of the Supplemental Nutrition Assistance Program (SNAP) benefits, commonly known as food stamps, by paid CNCS’ volunteers.”

And in crop insurance developments, an update yesterday from National Crop Insurance Services noted that, “As the claims come in from one of the worst droughts in decades, farmers and ranchers across the country are receiving indemnity payments for the losses they have incurred. To date, nearly $6.3 billion has been sent to farmers. And while crop insurance can be purchased to protect 128 different crops, the top five crops that suffered the most damage from the 2012 drought are corn, wheat, soybeans, cotton and grain sorghum.”

Also, DTN Executive Editor Marcia Zarley Taylor penned an interesting update yesterday at the DTN Minding Ag’s Business Blog titled, “Wrong Fight Over Insurance Subsidies.”

Meanwhile, Richard McGregor and James Politi reported yesterday at The Financial Times Online that, “The day after he released a video pressing fellow Republicans to hold the line against tax increases, Tim Huelskamp received a call from a senior colleague with bad news – he was being removed from key committees [Budget and Agriculture] in Congress…‘It was petty and vindictive,’ said Mr Huelskamp, who also lost his spot on the agriculture committee – the first time in Kansas’s 151-year history the rural state will not be represented on the congressional body, he says.”

More broadly on the budget issue, Jake Sherman and Carrie Budoff Brown and John Bresnahan reported last night at Politico that, “The fiscal cliff negotiations are at such a standstill that not even aides to President Barack Obama and House Speaker John Boehner (R-Ohio) talked Tuesday.

“And the way the White House sees it, there won’t be further face-to-face talks between the two leaders until Boehner says he’s willing to raise income tax rates.  If you believe Boehner’s leadership team, it’ll be a long December because he’s nowhere close to caving on raising rates.

“In this high-stakes battle over trillions of dollars in budget cuts and tax increases, the lack of any visible movement shows the fight right now is all about politics, not policy. Obama and Boehner are locked in a struggle for public opinion, the weapon that provides the upper hand in the negotiations.”

Jonathan Weisman reported in today’s New York Times that, “Senior Republican leadership aides say they are contemplating a fallback position since a standoff over expiring tax rates will be portrayed by Democrats as evidence that the opposition is willing to allow taxes to rise on the middle class to keep taxes from rising on the rich — and their intransigence could mean taxes go up on rich, poor and middle class alike.

“The leadership officials now say that if no deal can be struck to avert the automatic expiration of all the Bush-era tax cuts and the onset of deep, across-the-board spending cuts, they could foresee taking up and passing legislation this month to extend the tax cuts for the middle class and then resume the bitter fight over spending and taxes as the nation approaches the next hard deadline: its statutory borrowing limit, which could be reached in late January or February.”

And, Amie Parnes and Justin Sink reported yesterday at The Hill Online that, “President Obama rejected Speaker John Boehner’s (R-Ohio) $2.2 trillion deficit-reduction proposal on Tuesday while signaling he could consider entitlement reforms if congressional Republicans agree to higher tax rates for upper-income households.

“On entitlements, Obama avoided specific commitments, but said he would be ‘happy’ to look at ways to ‘strengthen’ Social Security and Medicare if Republicans agreed to higher rates on the wealthy.”

 

Trade

Julian Pecquet reported yesterday at The Hill’s Global Affairs blog that, “The Senate is expected to take up legislation normalizing trade relations with Russia on Wednesday following the anticipated passage of the defense bill late Tuesday.

“Congress is required to eliminate Cold War-era restrictions on trade with Russia if U.S. exports are to benefit from lower tariffs following Russia’s entry into the World Trade Organization earlier this year. Lawmakers in exchange have sought to link the trade bill to legislation that would impose travel and financial sanctions on alleged human rights violators.”

A news release yesterday from the American Soybean Association (ASA) noted that, “Reacting to news that a Senate vote on the Russia and Moldova Jackson-Vanik Repeal Act of 2012 may happen as early as Wednesday of this week the [ASA] is encouraging all senators to vote yes on the House-passed version of the bill without amendment. The bill, if passed by the Senate and signed into law by President Barack Obama, would graduate Russia from the Jackson-Vanik Amendment to the Trade Act of 1974, and establish permanent normal trade relations (PNTR) with the world’s ninth-largest economy. The House overwhelmingly passed its version of the bill, H.R. 6156, on November 16.”

Keith Good

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