FarmPolicy

October 21, 2014

Budget and the Farm Bill

Categories: Budget /Farm Bill

Budget: Fiscal Cliff Recap

Janet Hook and Carol E. Lee reported in Saturday’s Wall Street Journal that, “President Barack Obama on Friday tried to break the capital’s partisan budget impasse by urging congressional leaders to pass a stripped-down budget plan and put off until next year broader efforts to enact long-term deficit reduction [full remarks here].

“He spoke as lawmakers and the White House tried to find a new way forward in stalled negotiations designed to avoid the ‘fiscal cliff,’ the mix of year-end tax increases and spending cuts scheduled to take place in less than two weeks.

“Mr. Obama told reporters he was seeking quick action on a compromise bill that would extend current tax rates for middle income taxpayers and extend an expiring program of unemployment benefits.”

The Journal article added that, “But he acknowledged that time likely wouldn’t allow agreement before year’s end on a broader deal to avoid the fiscal cliff that Mr. Obama and House Speaker John Boehner had been working on until those talks collapsed earlier this week.

“Mr. Boehner (R., Ohio) said earlier in the day [full remarks here] that he remained available to negotiate a deal in the aftermath of his failure Thursday night to persuade the House Republicans he leads to pass his own stop-gap plan. Mr. Boehner’s plan would have blocked tax increases on most Americans in January while raising rates on income over $1 million.”

Jackie Calmes and Jonathan Weisman reported in Saturday’s New York Times that, “As Democrats on Capitol Hill described the possible fallback plan, it would be similar to legislation already passed by the Senate to extend the Bush-era tax rates for income below $250,000, increase to 20 percent from 15 percent the tax rate for capital gains and dividend income, and extend some other tax breaks.

“But the new bill, they said, would also delay the so-called sequester in January — across-the-board spending cuts in military and domestic programs that Mr. Obama and Congress scheduled in mid-2011 as an incentive for the two sides to approve an alternative, more deliberate deficit-reduction compromise. And it would extend federal unemployment benefits for the estimated two million Americans who have been out of a job for long enough to exhaust their initial state aid.”

Ed O’Keefe, Zachary A. Goldfarb and Lori Montgomery reported in Saturday’s Washington Post that, “But a temporary payroll tax holiday will probably end in January, taking an immediate bite out of paychecks for most workers. And without a bipartisan agreement to significantly cut spending, Republicans will not grant Obama an increase in the limit on federal borrowing — which will probably be needed within the next two months if the government is to avoid defaulting on its obligations.”

Barring an agreement, Damian Paletta reported in Saturday’s Wall Street Journal that, “Federal agencies are issuing warnings about large spending cuts set to begin in January while also taking steps to limit their effect, a process that took on greater importance Friday with Washington’s budget talks in disarray;” and, Darren Samuelsohn penned a more detailed article at Politico on Friday titled, “Sequestration: Where will the cuts hit?

Jennifer Epstein reported yesterday at Politico that, “Retiring North Dakota Sen. Kent Conrad said Sunday he hopes the ‘stripped-down’ proposal that President Barack Obama offered to Republicans on Friday won’t be the one that Congress passes, pushing instead for a deal that also tackles the debt.

“‘I would hope that we would have one last attempt here to do what everyone knows needs to be done, which is a larger plan that really does stabilize the debt and gets us moving in the right direction,’ the Democratic chairman of the Senate Budget Committee said on ‘Fox News Sunday.’

“He suggested that the two sides meet in the middle with a plan that averages out the offers made by the president and House Speaker John Boehner (R-Ohio) before talks fell apart. ‘Split the difference, that would be a package of about $2.6 trillion,’ Conrad said.”

Meanwhile, Paul Kane reported in yesterday’s Washington Post that, “The public collapse of talks between President Obama and House Speaker John A. Boehner (R-Ohio) has in the past been the signal for Mitch McConnell to step into the spotlight…[M]cConnell, a five-term incumbent, has been the key player in two major crisis-ending deals between the White House and congressional Republicans. First there was the December 2010 compromise to extend all of the George W. Bush-era tax cuts for an additional two years, followed by the complicated agreement in August 2011 to increase the Treasury’s borrowing authority.”

Likewise, Jonathan Weisman reported in today’s New York Times that, “With little more than a week for lawmakers to avert huge tax increases and spending cuts, attention is turning from the gridlocked House to the Senate, where some Republicans on Sunday endorsed President Obama’s call for a partial deal to insulate most Americans from the tax increases but defer a resolution on spending.

“Senators Kay Bailey Hutchison of Texas and Johnny Isakson of Georgia, both Republicans, implored Senate leaders to reach an accommodation with Mr. Obama when Congress returns on Thursday, even if that meant that taxes would go up for those with high incomes and that spending cuts would be put off.”

Today’s article noted that, “Democratic leaders say they will move forward on legislation this week only if Senator Mitch McConnell of Kentucky, the Republican leader, can assure them that it will not be filibustered and that once it is passed Mr. Boehner will bring it to a vote in the House.”

Mr. Weisman added that, “Mr. Obama, speaking to reporters Friday, left critical details out of his description of the plan he wants Congress to pass. Although he favors allowing the estate tax rate of 35 percent on inheritances over $5 million to rise to 45 percent on estate values over $3.5 million, for example, he did not say how such taxes should be treated as part of his stopgap fiscal plan. If nothing is done, the estate tax will jump to the Clinton-era level, 55 percent, on estate values over $1 million.”

Also, Patrick O’Connor and Peter Nicholas provided a “behind the scenes” look at the stalled budget talks between Speaker Boehner and President Obama in Saturday’s Wall Street Journal: “How ‘Cliff’ Talks Hit the Wall.”

 

Budget: Sandy Aid

David Rogers reported on Friday at Politico that, “A $60.4 billion Hurricane Sandy disaster aid package advanced in the Senate Friday, as Republicans agreed to cut off debate and confined their budget objections to $3.4 billion in construction funds for the Army Corps of Engineers — a fraction of the total package.

Final passage will be delayed until the Senate returns after Christmas to allow time to consider about 17 amendments still pending. But with the two big procedural votes behind them, Northeast Democrats are already stepping up pressure on the Republican-controlled House to act next.”

Mr. Rogers added that, “Indeed, Friday’s votes shift the onus to the House, but few believe the full $60.4 billion has any chance of being enacted in this session.”

Ramsey Cox reported on Friday at The Hill’s Floor Action Blog that, “The Senate advanced an emergency spending bill to aid victims of Hurricane Sandy.

“The 91-1 vote ended debate on the bill, and the Senate will proceed to votes on amendments to the package when they return to work, likely next Thursday [Dec. 27].”

 

Budget Impacts: Farmers, and the Farm Bill

Reuters writers P.J. Huffstutter and Tom Polansek reported on Friday that, “As the United States inches closer toward the ‘fiscal cliff,’ Iowa farmer Brian Van Meetern is hurriedly selling his grain before year’s end and buying a new $50,000 sprayer for his farm.

“Van Meetern, who works at an accounting firm during the winter, might have to pay a higher income tax and get a lower deduction in depreciation for farm equipment in 2013 if there is no deal in the budget battle before the new year.

“It’s a strategy that is being mimicked across the nation’s heartland where farmers and ranchers are plowing back profits into their operations in the face of less favorable tax policies that may take effect next year due to the stalemate over the budget talks in Washington.”

Friday’s article added that, “House Republicans and Senate Democrats remain deadlocked over how to best achieve major savings in farm programs, with debate centered on the levels of crop subsidies and cuts to the food stamp program for the poor. Discussions of an extension of the previous farm bill have been somewhat lackluster, say agricultural lobbyists.

Among the more hotly debated issues are a heavier reliance on crop insurance programs, levels of support for commodity crop subsidies, and reform of the subsidy program for cotton amid threats of trade retaliation from Brazil against some $800 million in U.S. exports.”

Also Friday, Reuters writer Ros Krasny reported that, “Alarm about an arcane provision that could send U.S. milk prices at the grocery store soaring, hurting millions of American households, has spurred calls for last-minute action on farm legislation that has been languishing for months.”

The article noted that, “‘The nation, including Vermont dairy farmers, incredibly enough now are on the verge of plunging over the dairy cliff,’ Democratic Senator Patrick Leahy, from the New England state known for its cheese and ice cream production, said on Friday [related statement from Sen. Leahy available here].

The Reuters item pointed out that, “Senator Debbie Stabenow, Senate Agriculture Committee chairwoman, lashed out at Republicans in the House of Representatives for inaction.

“‘Fiscal cliff tax increases would hit middle class families’ pocketbooks, but so would paying six or seven dollars for a gallon of milk,’ Stabenow said in an emailed statement.”

Chairwoman Stabenow’s statement added that, “It is absolutely critical that Congress pass a new five-year Farm Bill to keep food prices stable and protect America’s 16 million agriculture jobs. The Farm Bill reforms programs and cuts spending by $23 billion, so including it in a final deficit reduction deal will help the country avoid the fiscal cliff.”

Rep. Ron Kind (D, Wis.) tweeted on Friday that, “1949 ag policy will cost us $15 billion, increase prices & damage the dairy industry. We have 10 days, let’s pass a farm bill that works.”

And The Washington Post editorial board commented on U.S. dairy policy yesterday, noting in part that, “The bottom line, however, is that federal dairy policy increasingly amounts to using public resources to protect producers of a decreasingly popular commodity. Going over the ‘milk cliff’ would harm many consumers, but the pain might be worth it if it finally shocks the country into demanding an end to Congress’s fiddling with the milk market.”

Meanwhile, a “Q and A” article by Jim Spencer with House Agriculture Committee Ranking Member Collin Peterson (D., Minn.), posted over the weekend at The Minneapolis Star Tribune Online, noted that: “Q: What effect did the politics of the 2012 election have on the farm bill?

“A: It didn’t affect us on the [agriculture] committee. We had hostility from Republican leadership and some rank-and-file before the election. We had it after the election. I don’t think much changed. The problem now is that they’ve run us out of time. To get this bill done by the end of the year, the only way to do it is to put it in whatever they come up with [for a deficit deal]. That has shifted the power from us to Obama and Boehner, which makes us very nervousThey’re both fixated on just cutting money without regard to the long-term policy implications. … There’s talk that they’re going to eliminate direct payments [subsidies to farmers] and extend the rest [of the expiring farm bill].”

And in separate exchange, Rep. Peterson noted the importance of crop insurance: “Q: Do the delays in passing the farm bill make farmers vulnerable?

“A: As long as they have crop insurance, they’re going to survive … I’m talking about the guy who has 1,500 acres to 2,000 acres. A lot of time that’s a kid who just started five years ago. The only reason he’s farming is because he’s got crop insurance and he’s got these other safety nets he can take to the bank. And the bank can see, well, if the crop fails or the prices collapse, this guy’s going to have enough to pay back his operating loan. You eliminate that and the only people who will be able to farm are people with deep pockets. And you will consolidate agriculture like nothing you have ever seen. And that’s not a good thing.”

Friday’s Agriculture Today radio program from the Red River Farm Network included analysis on the Farm Bill and budget situation from Mary Kay Thatcher, director of public policy from the American Farm Bureau Federation.  A clip from Friday’s Agriculture Today program with Randy Koenen and Ms. Thatcher can be heard here (MP3- 1:24).

And during an interview this week with Jeff Nalley on the Agri-Pulse “Open Mic” program, Sec. of Agriculture Tom Vilsack noted that without the Farm Bill being tacked into ongoing budget considerations, cuts to agriculture related programs could occur without the policy corroboration of the Agriculture Committees, which could negatively impact farm policy- related clip here (MP3- 0:57), full Agri-Pulse interview with Sec. Vilsack here.

In other news, T. Rees Shapiro reported in today’s Washington Post that, “When classes end for the holidays, many students in the region who depend on their schools’ free and reduced-price meal programs will turn to a patchwork of generosity for something to eat. For thousands of low-income children in the Washington area, that could mean no steady meals during the 10-day break.”

John Schwartz reported in today’s New York Times that, “The Mississippi River is still open for business — for now. January is another story…[T]hose who ship goods up and down the river have asked the federal government to do two things: destroy rock formations known as pinnacles in Southern Illinois that hinder navigation when the water is shallow, and release more water from reservoirs along the upper Missouri River.

“The Army Corps of Engineers has begun meeting the first request, using excavating equipment to break down the formations. Officials said the work should take 30 to 45 days.

Getting the corps to release the water has been more difficult.”

Ian Berry reported yesterday at The Wall Street Journal Online that, “Corn futures slid to a five-month low last week, weighed down by persistently weak overseas appetite for the U.S. crop.

“A string of tepid export-sales reports for U.S. corn continued last week as importers balk at prices for the grain. Despite recent declines, prices for U.S. corn remain high in historical terms, prompting corn buyers to look elsewhere. In recent months, buyers, including Japanese importers, have turned to less-expensive sources such as Brazil, which ranks behind only the U.S. among corn exporters.

Corn exports for the crop year that began Sept. 1 are 50% lower than they were at this stage a year ago, according to U.S. Department of Agriculture data. They are also 55% below the recent five-year average.”

Meanwhile, Aaron Lucchetti and Jacob Bunge reported yesterday at The Wall Street Journal Online that, “The court-appointed authorities liquidating various parts of MF Global Holdings Ltd. agreed to settle long-running legal disputes, a three-way truce expected to help customers of the failed brokerage firm get their money back more quickly.

“The bankruptcy officials liquidating MF Global’s holding company, its U.S. brokerage and its U.K. arm struck a deal late Friday to resolve claims among the estates. U.S. brokerage trustee James Giddens said the move could bring $500 million to $600 million into his coffers to distribute to customers.”

Keith Good

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