FarmPolicy

July 30, 2014

Senate Passes Fiscal Cliff Deal- Farm Bill Concerns Noted

Categories: Budget /Farm Bill

Lisa Mascaro, Kathleen Hennessey and Michael A. Memoli reported today at the Los Angeles Times Online that, “The Senate voted overwhelmingly early Tuesday to approve legislation to halt a tax increase for all but the wealthiest Americans while postponing for two months deep spending cuts. The vote came just hours after the accord was reached between the White House and congressional leaders.

“After a rare holiday session that lasted through the New Year’s Eve celebration and two hours into New Year’s Day, senators voted 89-8 to approve the proposal. Three Democrats and five Republicans dissented, most prominently Sen. Marco Rubio (R-Fla.).”

The article noted that, “President Obama, in a statement released by the White House early Tuesday morning, said, ‘While neither Democrats nor Republicans got everything they wanted, this agreement is the right thing to do for our country and the House should pass it without delay.’

“The lopsided vote puts pressure on the House to swiftly follow suit to ensure the nation avoids the so-called fiscal cliff. As long as Congress is seen to be working toward a solution, no dire economic fallout is expected from the delay. The House is expected to bring the bill up Tuesday afternoon.”

The LA Times article pointed out that, “The deep automatic spending cuts scheduled to begin Wednesday — the other part of the ‘fiscal cliff’ — would be pushed back just long enough to ensure that the partisan budget battles marking Obama’s first term will also punctuate the beginning of his second. Negotiations over the cuts were expected to be rolled into talks about extending the nation’s debt ceiling, a prospect Democrats promised to resist.”

With respect to policy details, today’s article explained that, “The agreement would set the top tax rates at 39.6% for income above $450,000 for households and $400,000 for individuals, according to a source who spoke on the condition of anonymity because he was not authorized to discuss the negotiations.

“Tax rates on investment income would also rise for those higher-income households, from the historic low 15% rate on capital gains and dividends to 20%. Obama had wanted to tax dividends at the same rate as ordinary income.

“The rate for the estate tax was a key sticking point throughout the weekend. The agreement would set a new rate at 40% on estates valued at more than $5 million. That is a compromise between the 35% rate in effect in 2012 and the 45% rate Democrats demanded on estates of $3.5 million or more.”

“The deal also includes a permanent fix for the alternative minimum tax, a part of the tax code that was established decades ago to ensure high-income earners paid at least a minimum amount of tax even if they were able to reduce their liability through extensive deductions.”

Suzy Khimm reported late last night at The Washington Post Online that, “The tax on capital gains and dividends will be permanently set at 20 percent for those with income above the $450,000/$400,000 threshold. It will remain at 15 percent for everyone else. (Clinton-era rates were 20 percent for capital gains and taxed dividends as ordinary income, with a top rate of 39.6 percent.)

The estate tax will be set at 40 percent for those at the $450,000/$400,000 threshold, with a $5 million exemption. That threshold will be indexed to inflation, as a concession to Republicans and some Democrats in rural areas like Sen. Max Baucus (D-Mt.).”

The Post update added that, “The deal will not address the debt-ceiling, and the payroll tax holiday will be allowed to expire.”

Jonathan Weisman reported today at The New York Times Online that, “Democrats also secured a full year’s extension of unemployment insurance without strings attached and without offsetting spending cuts, a $30 billion cost….[I]n one final piece of the puzzle, negotiators agreed to put off $110 billion in across-the-board cuts to military and domestic programs for two months while broader deficit reduction talks continue.”

The Times article pointed out that, “The nature of the deal ensured that the running war between the White House and Congressional Republicans on spending and taxes would continue at least until the spring. Treasury Secretary Timothy F. Geithner formally notified Congress that the government reached its statutory borrowing limit on New Year’s Eve. Through some creative accounting tricks, the Treasury Department can put off action for perhaps two months, but Congress must act to keep the government from defaulting just when the ‘pause’ on pending cuts is up. Then in late March, a law financing the government expires.

“And the new deal does nothing to address the big issues that Mr. Obama and [House Speaker John Boehner (R., Ohio)] hoped to deal with in their failed ‘grand bargain’ talks two weeks ago: booming entitlement spending and a tax code so complex that few defend it anymore.”

Alexander Bolton reported this morning at The Hill Online that, “The 89-8 vote puts pressure on the GOP-led House to approve the legislation, though it remains to be seen if most House Republicans will back a bill that would add to the deficit and lacks the deep spending cuts that conservatives have been calling for.”

Today’s update explained that, “The House Rules Committee has already waived the requirement of a three-day review period, setting the stage for a New Year’s Day vote. But it remains unclear if the House will vote on the bill before Thursday, when the 113th Congress will be sworn in.

“‘The House will honor its commitment to consider the Senate agreement if it is passed,’ Boehner said. ‘Decisions about whether the House will seek to accept or promptly amend the measure will not be made until House members — and the American people — have been able to review the legislation.’”

The Hill update added that, “It will also include a one-year extension of the 2008 farm bill without dairy reforms, to the chagrin of Senate Agriculture Committee Chairwoman Debbie Stabenow (D-Mich.).

“‘This is Mitch McConnell’s farm bill’ she said. ‘I will vote for it but I am on record that I am not happy with what was done to agriculture.’

The farm bill provision stops a possible doubling of milk prices but does not contain reforms and $24 billion in deficit reduction in a Senate passed five-year bill.”

More specifically on the Farm Bill, the AP reported yesterday that, “A potential doubling of milk prices will be averted as part of the compromise that White House and congressional bargainers reached on wide-ranging legislation to avert the ‘fiscal cliff,’ a leading senator said late Monday.

“Senate Agriculture Committee Chairwoman Debbie Stabenow, D-Mich., told reporters that negotiators had agreed to extend portions of the expired 2008 farm bill through September. She said that includes language keeping milk prices from rising, but excludes other provisions like energy and disaster aid for farmers.”

The article noted that, “Just a day earlier, Stabenow said leaders from both parties on the House and Senate agriculture committees had agreed to extend the entire farm bill.

“Stabenow and House Agriculture Chairman Frank Lucas, R-Okla., announced Sunday that they had agreed on a last-minute move that would extend the entire farm bill and replace dairy programs that expire at midnight Tuesday. Expiration of those dairy programs could mean higher milk prices at the grocery store within just a few weeks.

“But the House GOP had not endorsed the committees’ extension agreement.”

The AP article added that, “Extending the entire agriculture bill would have included an overhaul of dairy programs that was included in both the Senate and House committee bills. The new dairy programs include a voluntary insurance program for dairy producers, and those who choose that new program also would have to participate in a market stabilization program that could dictate production cuts when oversupply drives down prices — an idea that hasn’t gone over well with Boehner.”

Ellyn Ferguson reported late last night at Roll Call Online that, “The package worked out between Senate leaders and the White House to avert the fiscal cliff include provisions to extend current farm law for the rest of fiscal 2013, avoiding a scenario that could lead to a doubling of milk prices.

“The extension of programs in the 2008 farm law, which expired in September, represents a trimmed-down version of a plan proposed by Senate and House Agriculture committee leaders this weekend. Instead, Senate Minority Leader Mitch McConnell, R-Ky., offered a plan that would extend a dairy program that producers want to replace and would not include disaster assistance, according to a Senate aide.”

Ms. Ferguson noted that, “The plan also would not fund energy provisions and other expired programs that were in the 2008 farm bill (PL 110-246), the aide says, a decision that Senate Agriculture Chairwoman Debbie Stabenow, D-Mich., called ‘absolutely outrageous.’

“‘Without consultation with me or the chairman in the House, we now have a partial extension,’ she said in an angry speech on the Senate floor. ‘They not only do not extend all the titles, but they do not include critical disaster assistance.’”

A video replay of Chairwoman Stabenow’s Senate floor presentation from yesterday, which also included a colloquy with Sen. Jeff Merkley (D., Ore.) can be viewed here, at FarmPolicy.com Online.

Last night’s Roll Call article indicated that, “The agreement that Stabenow and House Agriculture Chairman Frank D. Lucas, R-Okla., had worked out would provide nearly $850 million in disaster aid and set up a new dairy revenue support program known as the Dairy Security Act. The disaster aid, under the committees’ deal, would be funded by a small cut in the annual direct payments that go to grain and cotton growers.

“Stabenow said she and Lucas, realizing that House Agriculture’s five-year bill (HR 6083) would not be brought to the floor, decided to join together to write an extension that could still do a lot of what they originally wanted from a farm bill. She said McConnell’s decision to trim back their effort showed that ‘agriculture is just not a priority.’

“‘Where is the willingness to support farmers and ranchers across the country?’ she asked. ‘We know we need to get things done, but we also need to make sure that in the end, we are not putting agriculture, farmers and ranchers, at a disadvantage in the process.’”

Andrew Ackerman and Corey Boles reported today at The Wall Street Journal Online that, “Congressional lawmakers and the Obama administration have agreed to prevent sharp increases in the price of milk and to extend other farm programs through September, as part of a broader budget agreement reached late Monday.

“But Senate Agriculture Committee Chairwoman Debbie Stabenow (D., Mich.) told reporters Monday evening that she was disappointed negotiators excluded an extension of certain energy programs and disaster-relief for farmers. She said she would continue to fight for these provisions in 2013.”

Lindsey Boerma reported yesterday at CBS News Online that, “To stop milk prices from climbing to $8 a gallon come January, Senate Minority Leader Mitch McConnell, R-Ky., is scrambling to piece together what is essentially a new farm bill using select scraps of the bipartisan extension deal approved Sunday by both the Senate and House agriculture committees, according to a Senate aide familiar with the bill, who called McConnell’s proposal a ‘lose-lose.’”

Yesterday’s CBS update noted that, “…[T]he Senate aide said, McConnell’s bill would continue $5 billion in direct payments to farmers, whether they grow crops or not, and would extend at the post-August 2012 level the USDA’s Milk Income Loss Contract (MILC) program, which compensates dairy producers when domestic milk prices fall below a specific level. McConnell would also propose eliminating the energy title, conservation programs, specialty crops and organic provisions, and would not include disaster assistance in his bill, the aide said.”

Felicia Sonmez reported last night at the Post Politics Blog (Washington Post) that, “In a floor speech Monday night, as the fiscal cliff talks continued, an incensed Senate Agriculture Committee Chair Debbie Stabenow (D-Mich.) took aim at Republicans for the last-ditch extension, which she charged ‘only extends part of the farm programs and keeps 100 percent of the direct subsidies going.’

“‘I want to hear somebody justify that on the floor,’ she said.”

And Daniel Looker reported last night at Agriculture Online that, “In a last-minute addition to the fiscal cliff deal moving through the Senate, Senate Minority Leader Mitch McConnell (R-KY) is reportedly crafting his own farm bill extension that continues direct payments at the same level as the 2008 farm bill, dropping any support for smaller programs that weren’t funded beyond the law’s expiration last October.

“‘It seems like he wants direct payments with no cuts…and no funding for disaster or for any of the orphan programs including energy.  Incredible, just incredible,’ one Washington lobbyist told Agriculture.com.”

Mr. Looker added that, “McConnell’s approach to dairy policy is nearly as antiquated at the 1949 permanent farm bill law but at a much lower price level, avoiding the so-called dairy cliff or milk cliff that would raise milk prices for consumers.

“‘The program McConnell wants to extend is the product purchase program where the government buys up products (cheese, non-fat dry milk, and butter) at roughly the equivalent of a $9.90 all milk support price.  It’s basically what is in the permanent law we’re all trying to avoid, just at a lower level,’ the aide said. ‘In effect, it’s a non-existent support program.  The current support levels are so low that they’re meaningless and have rarely triggered.  No one has relied on it as a support program for the last four years, they’ve relied on MILC (Milk Income Loss Contract program), but even that has been inadequate.’”

Bloomberg writer Derek Wallbank reported today that, “The extension, included at the request of Senate Minority Leader Mitch McConnell, rankled some farm-state lawmakers who’d pushed for an overhaul of dairy support programs and had pushed for action instead on a five-year agriculture bill.

“‘It does guarantee current policy continues and milk prices will not go up,’ said Senate Agriculture Committee Chairwoman Debbie Stabenow. ‘But if you’re a small dairy farmer, it doesn’t help you a bit.’”

The article noted that, “House and Senate agriculture committee chiefs yesterday said they backed a different one-year extension of the 2008 farm bill. Collin Peterson, the ranking Democrat on the Agriculture Committee, has said he’ll oppose the short-term dairy-only bill if it’s brought to the floor, calling any one-month extension measure a ‘cruel joke’ on American farmers.

“A Republican leadership aide said the House was keeping its options open to ensure the milk issue was resolved by today.”

Pete Kasperowicz reported last night at The Hill’s Floor Action Blog that, “The House [on Tuesday] is also expected to consider a bill to extend current dairy programs for another 30 days, to avoid a possible spike in milk prices. The bill, from House Majority Leader Eric Cantor (R-Va.), is one of three options Republicans prepared to avoid this problem.”

Keith Good

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