*Ed note: My colleague Jerry Hagstrom, acclaimed agriculture journalist and author of the subscription-only The Hagstrom Report, has allowed Obama Foodorama to cross-post his detailed analysis of what the future holds, now that the Supercommittee has admitted defeat...
Supercommittee Failure Means Uniform Cuts
As Congress Fights Over New Farm Bill In 2012
By Jerry HagstromAs Congress Fights Over New Farm Bill In 2012
The Joint Select Committee on Deficit Reduction’s failure to come up with a proposal into which a new five-year farm bill could have been incorporated means that the Office of Management and Budget will announce early next year that farm programs will be subject to across-the-board cuts at the same time that Congress is struggling to write a new five-year bill in regular legislative order.
"After months of hard work and intense deliberations, we have come to the conclusion today that it will not be possible to make any bipartisan agreement available to the public before the committee’s deadline,” Sen. Patty Murray, D-Wash. ,and Rep. Jeb Hensarling, R-Texas, the co-chairs of the supercommittee, said in a statement issued at 4:46 PM on Monday, after the markets had closed.
Senate Agriculture Committee Chairman Debbie Stabenow, D-Mich., and House Agriculture Committee Chairman Frank Lucas, R-Okla., said in a joint statement that agriculture committee leaders had developed a bipartisan, bicameral proposal for the Committee on Deficit Reduction that would save $23 billion.
“However, the Joint Select Committee’s failure to reach a deal on an overall deficit reduction package effectively ends this effort,” the statement said.
“We are pleased we were able to work in a bipartisan way with committee members and agriculture stakeholders to generate sound ideas to cut spending by tens of billions while maintaining key priorities to grow the country’s agriculture economy. We will continue the process of reauthorizing the farm bill in the coming months, and will do so with the same bipartisan spirit that has historically defined the work of our committees.”
Senate Agriculture Committee ranking member Pat Roberts, R-Kans., said the supercommittee’s failure “means that a farm bill will now be written in regular order as it should be.”
“In recent weeks, the chairs of the House and Senate agriculture committees have worked on a farm bill proposal, largely without my input and the input of the other members of the two committees,” Roberts said. “The last proposal was so ‘secret’ that I still have not seen final legislative language and scores.”
Roberts also said that, while “significant strides” were proposed in crop insurance and conservation programs, “I had substantial concerns about what little I knew of the direction of the commodity title and the inequitable distribution of spending reductions between commodities, conservation, nutrition and specialty crop programs.”
Complicated process ahead for Farm Bill...
Roberts’s statement reveals how difficult and complicated it will be for agricultural leaders to achieve their often competing goals through the processes of across-the-board cuts and regular order for the farm bill.
Roberts has said repeatedly this year that the nutrition programs, which make up about 75 percent of the Agriculture Department budget, should be subject to cuts, but in fact the bill that Stabenow and Lucas had written cut food stamps by $4 billion over 10 years, and exempted -- at Roberts’ insistence -- any cuts to crop insurance, while the program of “sequestration” or across-the-board cuts exempts food stamps, and will require cuts in crop insurance.
The debt ceiling bill that gave the Treasury Department the power to raise the debt ceiling also said that if the congressional supercommittee failed to reduce the deficit by $1.5 trillion over 10 years, across-the-board cuts in both defense and domestic spending would go into effect in 2013 to achieve $1.2 trillion in savings over 10 years.
Domestic programs, other than those that are exempt such as food stamps, are to be cut by 7.8 percent in 2013 and an unspecified percentage in years after that.
House Agriculture Committee ranking member Collin Peterson, D-Minn., has said that agriculture programs would be cut about $15 billion over 10 years, an amount that is less than the $23 billion that the agriculture committee chairmen and ranking members told the super committee they would accept in exchange for writing a new farm bill.
But the $15 billion cut will be much more concentrated in crop subsidies, conservation programs and crop insurance than if the agriculture leaders’ new farm bill had been accepted. And on top of that, the pressure not to reduce defense spending as much as the debt ceiling bill requires might mean that there will be pressure for an even bigger cut to agriculture programs.
President Barack Obama said in a statement on Monday night that he would veto any proposal to reduce the defense or domestic spending cuts.
“There will be no easy off ramps on this one,” President Obama said.
Under sequestration, all programs will be cut by the same percentage. The direct payments that the agriculture leaders were planning to eliminate or phase out will be subject to the same cut, as will marketing loans and most mandatory conservation programs.
Although the Office of Management and Budget has not issued definite statements on what programs will be exempt, the Conservation Reserve Program payments are unlikely to be cut because the government does not usually cut multi-year contracts during deficit reduction.
Crop insurance, subsidies likely to be cut...
But crop insurance programs are annual contracts, and both the subsidies to crop insurance companies and agents for delivering the policies and the premium subsidies to farmers are likely to be subject to cuts.
The Obama administration had already called for cuts to crop insurance when it proposed that $33 billion be cut from farm bill spending, so any appeal to OMB on the crop insurance issue is unlikely to find a receptive audience. Ferd Hoefner of the National Sustainable Agriculture Coalition noted in an email today that since crop insurance is now the largest farm subsidy program, it would be subject to the largest cut.
Food stamps along with other social welfare programs are exempt, but the situation with other nutrition programs is unclear, even though they serve poor people.
The special nutrition program for women, infants and children known as WIC operates like an entitlement, but it is appropriated and it appears likely it would be subject to cuts, as would commodity distribution programs. Whether school meals would be cut is also unclear. It’s possible that some aspects of the food stamp program might be subject to cuts, but OMB has not issued clear guidance on the nutrition programs, a Senate aide said on Monday.
Whether Congress can write a new farm bill in 2012 is open to question.
Sen. Charles Grassley, R-Iowa, told reporters last week that if Lucas were asked he would probably say that he could not get a bill through his committee. Lucas’s office did not respond to a query about whether Lucas agreed with that statement.
The Environmental Working Group, which is critical of crop subsidies and favors conservation, nutrition and programs that promote healthier eating, decried the agriculture leaders’ secretiveness in writing the farm bill that would have gone to the super committee.
But the passage of the fiscal year 2012 Agriculture appropriations bill with its provisions to restrict the Agriculture Department’s ability to implement a rule to improve the quality of school meals and to rewrite the Grain Inspection, Packers and Stockyards Act rule is an indication that progressives would face a difficult time in getting Congress to continue or improve programs they believe are important.
Likewise, the appropriations bill contained a provision tightening up limits on payments to big farmers, a prospect that gives conventional agriculture groups heartburn.
It’s unclear what will happen to the proposal that Stabenow and Lucas wrote. They never officially released that bill or showed legislative language to other members of their committees. The most public knowledge of that proposal came from a summary that Stabenow prepared for the super committee that was leaked. That proposal did not contain details of the commodity title proposals and was dated by the time reporters got their hands on it, Stabenow aides said.
What's ahead in the regular legislative order...
Consideration of a farm bill in regular legislative order is likely to spur debate, as provisions in that proposal would raise target prices. Some groups have said that high target prices are likely to encourage farmers to plant major crops like corn, soybeans and wheat rather than engage in the rotation that environmentalists say is better for the land and leads to the planting of crops that have grown in importance since the 1996 farm bill allowed planting flexibility.
Regular order is also likely to mean public discussion about whether the new proposals would mean the United States has to classify more of its farm payments as trade-distorting, whether the country might exceed its $19.6 billion annual limit on those programs, and what kind of message the country is sending to the World Trade Organization about the trade-distorting subsidies that the U.S. government has always discouraged in international forums.
The American Farm Bureau Federation, which has criticized the farm bill proposals that were in the super committee proposal, said in an email today that regular order would allow for consideration for proposals it had made that had been rejected.
If Congress cannot reach agreement on a new farm bill, some lobbyists have suggested that the 2008 bill should be extended until 2013, when a new Congress might take a different view of it.
Congress will have to take some action before the 2008 act expires on Sept. 30, 2012, because that expiration would trigger a revival of the 1949 farm act, which contains provisions that are totally out of date and would also cause much higher government spending levels.
But an extension of the 2008 farm bill would not stop sequestration, and it would mean there would not be money for disaster programs, whose authority ended on Sept. 30, or for renewable energy development programs whose baseline ends on Sept. 30, 2012.
The Stabenow-Lucas proposal had extended renewable energy programs, but the Agriculture Energy Coalition had already expressed “great disappointment” that the bill reauthorized energy programs “only at modest levels and without mandatory funding.”
Farm group reaction...
Farm groups issued mostly bland statements about the future.
“Presumably there will be a regular process of holding hearings and seeking input to consider the alternatives that the committee was working on, as well as additional alternatives,” said National Farmers Union President Roger Johnson. “NFU will continue to advocate for a safety net that provides support during difficult times – when markets collapse or when disasters strike.”
National Association of Wheat Growers CEO Dana Peterson said, “We are disappointed the super committee has failed at its task. Our growers understand our country has a lot of very serious issues in front of it right now, with effects well beyond farm policy. We are encouraging members of Congress to have an open dialogue on the path forward for our country, our economy and our industry.”
Peterson also noted that the group had never seen a written copy of the commodity title.
National Corn Growers Association President Garry Niemeyer said the group was disappointed and would continue to advocate for “market-based risk management farm programs that recognize our nation’s difficult financial situation.”
The National Cotton Council, which had earlier praised the ag committee proposal, declined to comment today.
Peterson, Senate Budget Committee Chairman Kent Conrad, D-N.D., and Senate Finance Committee Chairman Max Baucus, D-Mont., who was considered the Aggie on the supercommittee, did not respond to requests for comment.
“There are so many scenarios that no one really knows what will happen,” Hoefner said in an email.
Congress “could punt to 2013, with or without sequestration being allowed to trigger,” he said.
Or it “could take it up quickly in 2012 hoping to get in front of any later action on deficit reduction,” or it “could wait for budget deal to solidify in 2012, assuming there is another shot at trying to prevent sequestration, though if that takes a long time there would not likely be enough time remaining to develop farm bill, unless they basically went with what they were going to do now but didn't.”
*Senate Agriculture Committee Recommendations to the Super Committee [PDF]
*Cross-posted from The Hagstrom Report. To subscribe to The Hagstrom Report, check out TheHagstromReport.com.
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