House Agriculture Committee Chair Frank Lucas (R-OK) says it lacks credibility and Sen. Pat Roberts (R-OK), ranking member of the Senate ag panel, says it reveals a fundamental lack of understanding of how agriculture operates, but this week President Obama proposed nearly $40 billion in cuts to agriculture spending programs, including killing off all direct payment programs. Obama rationalized the surprisingly deep cuts in ag spending over the next 10 years by pointing at net farm income, this year hitting about $103 billion, a 35-year record thanks to high commodity prices and record exports. His proposal also echoes the $34-billion cut a joint House-Senate budget negotiating team led by Vice President Joe Biden proposed. Obama said “ag was faring better than other parts of the economy,” as he recommended $30 billion in cuts to direct farm programs, $8.3 billion in reductions for crop insurance, and another $2 billon reduction in conservation spending. Obama’s plan, however, would reauthorize and extend federal ag disaster programs, including the SURE program, for another five years at a cost north of $6 billion. However, reports circulating in Washington, DC, indicate the White House proposals on ag cuts were made without consulting USDA, a move that has national agriculture organizations nervous on how far the President may really want to go. It also left Secretary of Agriculture Tom Vilsack with little to explain or defend the White House proposal other than to say it’s “now time to reshape farm program spending.” Rep. Collin Peterson (D-MN), House ag panel ranking member, said he’s taking a hard line against the President’s proposal, adding he could support no more than about $15.5 billion in overall ag spending reductions, and deficit committee member and chair of the Senate Finance Committee and member of the Agriculture Committee Max Baucus (D-MT) said there is no support for the President’s recommended cuts in ag, adding some might be willing to go to $20 billion over 10 years, but there’s no support above that level. “The president’s policy priorities reveal a lack of knowledge of production agriculture and fail to recognize how wholesale changes to farm policy would impact the people who feed us,” said Lucas and Roberts in a joint statement. The two ag leaders said cutting $8 billion out of crop insurance by rejiggering the return on investment percentages to insurance companies and reducing the percentage of farmer premium picked up by the government “puts the entire program at risk,” they said. Both men joined Sen. Debbie Stabenow (D-MI), chair of the Senate Agriculture Committee, reissuing their commitment to agriculture’s contribution to deficit reduction, but stressed ag has already taken major cuts over the last three years, and any changes in program spending should be made by the chamber agriculture committees, not the deficit committee. All three also restated in separate statements that producers repeatedly avow crop insurance is the single best risk management tool available to them. As to the SURE program, Lucas and Roberts said it hasn’t worked and questioned extending it, but also pointed out the White House proposal does nothing to attack waste, fraud and abuse in USDA nutrition programs, which account for 80% of USDA spending.
Several national agriculture organizations whose members have benefited over time from direct payment programs this week unveiled alternatives to those programs, a tacit recognition the days of federal checks on crop production are over. At the same time, the President, fresh off proposing nearly $40 billion in ag spending cuts, told the Joint Special Committee on Deficit Reduction to increase its targeted budget cuts from the congressional mandated $1.5 trillion to over $2 trillion to offset the costs of his job proposal, while House Blue Dog Democrats and over two dozen Senators urged the deficit committee to “go big” in its search for cuts, telling the panel $4 trillion budget reductions over 10 years is doable. Sen. Kent Conrad (D-ND), the lame duck chair of the Senate Budget Committee, said a $4-trilliion, 10-year package is not doable or approvable, calling for restraint. He also continues to tease colleagues with a plan he has that combines countercyclical, ACRE and ag disaster assistance into a new farm bill proposal. He said his plan falls in line with the President’s deficit reduction commission recommendations, but would also fund ag disaster programs retroactive to October 1, 2010, and if Congress were to embrace the Conrad approach, the Farm Bill would essentially be written as part of the deficit committee’s spending reduction package.
When former House Agriculture Committee Chair Collin Peterson (D-MN) told producer groups two years ago “the money just won’t be there” for a conventional approach to income protection in the 2012 Farm Bill, he floated the idea of a “whole farm insurance product,” a risk management approach built off conventional crop insurance. This week, as President Obama proposed a rewrite of how federal crop insurance operates—along with an $8-billion reduction in spending—Peterson’s got to be a least a little proud of his foresight. Politicians from both sides of the aisle who understand production agriculture said this week federal crop insurance is the one risk management tool in which farmers and ranchers actually have faith, and to try and cut even more out of the program after $6 billion in cuts taken over the last two years—$12 billion total in cuts since 2008—through the rework of the Standard Reinsurance Agreement (SRA) with USDA, puts the program at risk at a time when most producer groups are trying to reinvent income safety net programs in the image of federal crop insurance. Producers and ag state members of Congress also contend the SRA savings was not figured into the baseline when the overall program was reviewed for spending cuts, a lack of action which distorts the program’s contribution to deficit reduction. Insurance companies are looking at a two point reduction in their operating reimbursement, and farmers are looking at a two point shift in premium subsidy, all while USDA’s Risk Management Agency (RMA) is in the process of trying to bring the overall crop insurance industry into the 21st century by recognizing technology advances, like biotech crops, segregating disasters not likely to occur but once in a decade, and overall rewrite of how RMA rates crops that could lead to premium reductions on insurance covering major crops. But insurance companies contend producers are already buying the maximum insurance allowed so there is no income increase for them.
The House and Senate Agriculture Committees have until October 14 to provide the Joint Special Committee on Deficit Reduction with detailed program cuts and legislative language to implement those cuts, and national agriculture groups are wasting no time ensuring both committees have alternative program proposals in hand when the committees craft their ag recommendations. The most ambitious option is put forward by the National Corn Growers Association (NCGA), and is the product of over a year of study. NCGA’s Agriculture Disaster Assistance Program (ADAP) would replace direct, countercyclical and Average Crop Revenue Election (ACRE) payments, and NCGA says the program’s beauty is its simplicity and the fact it only triggers with a true on-farm loss. ADAP would keep the marketing loan program for corn without raising loan rates, and unlike ACRE which requires farmers to take a 30% cut in their loan rate, ADAP participants don’t take the cut. Claiming a revenue guarantee of 95%, ADAP uses harvest prices, not the complicated Olympic average formula of the ACRE program, and would base payments on revenue in crop report districts within a state, not the entire state. Payments would be based on a farm’s actual planted acreage and would not be limited by base acres. ADAP enrollment would be annual—not for the life of the Farm Bill—and producers would not have to seek landlord approval to participate. The National Cotton Council is putting the finishing touches on its Stacked Income Protection Plan (STAX), a risk/income protection program designed to complement existing crop insurance. The National Farmers Union (NFU) is pushing for a return to a producer-owned grain reserve, while the American Soybean Association (ASA) finalizes its studies for presentation to the two ag panels.
Secretary of Agriculture Tom Vilsack told the U.S. Farmers & Ranchers Alliance in a speech this week in Washington, DC, that five disaster aid programs authorized in the 2008 Farm Bill will expire at the end of this month. “We’re rapidly approaching October 1…and when we do the disaster programs that are in place today will go out of existence,” he warned. Vilsack said Congress failed to adequately fund the programs over the life of the last Farm Bill. The secretary also explained that while the Senate has included emergency disaster spending in its FY2012 spending negotiations, none of the money goes to the expiring ag disaster programs. While Vilsack said the programs have provided more than 200,000 farmers over $2 billion in assistance, ag groups are not clamoring for new money because they’re frustrated with the time it takes to get aid through the programs and they’re confident or hopeful funding will be included through the 2012 Farm Bill. However, because the programs expire before the overall bill does, the programs can’t be counted in the baseline funding for the new bill. This means Congress would have to find about $4.8 billion in offsets to pay for the programs.
The long road toward congressional approval of free trade agreements with Panama, Colombia and South Korea got a bit shorter this week as the Senate approved a general trade authority bill, including reauthorization of the General System of Preferences (GSP), the legislative vehicle carrying an expanded Trade Adjustment Act (TAA) reauthorization. Under a previously cut deal with the White House, once there is a clear pathway for TAA reauthorization and expansion, the White House will formally submit the three trade deals to the Hill. But as the Senate moves forward, the House continues to struggle with how to move the TAA bill, and House Speaker John Boehner (R-OH) this week said the House will take up the Senate-passed bill once the President has submitted the three pending free trade agreements to the Senate. The TAA language, reauthorizing federal assistance to U.S. workers who job, wages or hours are negatively impacted by trade agreements, is the product of an agreement by Senate Finance Chair Max Baucus (D-MT) and House Ways & Means Committee Chair Dave Camp (R-MI), and extends TAA protections to trade with all countries, including China, Japan and Korea which were exempted under the old version of TAA. At the same time, Senate Minority Leader Mitch McConnell (R-KY) filed an amendment this week to renew trade promotion authority allowing for speedier congressional approval of trade pacts, but this and other related amendments were rejected to keep the broader deal intact.
As the House takes up the Transparency in Regulatory Analysis of Impacts on the Nation Act (TRAIN), a bill that would force EPA to conduct extensive new interagency regulatory and economic analyses of many existing and pending rulemakings, President Obama this week said he’ll veto the measure if it reaches his desk. The bill is designed in part to take on two major EPA rulemakings – standards for mercury and interstate smog and particulate pollution – and Rep. Ed Whitfield (R-KY) this week announced he will seek to amend the bill to force longer delays in the regulations’ implementation. The White House says the bill will force agencies to “develop costly, unnecessary and redundant reports” and gut regulations designed to protect public health. The legislation was approved this summer by the House Energy & Commerce Committee, but the bill is unlikely to get traction in the Senate.
Given the bill’s author is the committee’s chair, it was no surprise this week when the House Judiciary Committee approved legislation by Rep. Lamar Smith (R-TX) that would mandate all U.S. employers use the on-line E-Verify database to confirm the citizenship of existing and potential employees. The bill, widely opposed by production agriculture and immigration reform advocates, uses E-Verify to replace the old paper I-9 system, and will also reduce the number of documents need to establish worker legal status; coordinate activities of the Social Security Administration and the Department of Homeland Security to ensure Social Security numbers are used fraudulently; protect employers who make good faith attempts to verify legal status of workers; preempt state and local laws, and create a voluntary biometric pilot program to ensure the accuracy of verification results.
The deteriorating state of the nation’s waterways, including locks and dams, was the subject this week of a House Transportation & Infrastructure subcommittee hearing. Witnesses, who included the Waterways Council, of which several commodity groups are members and the National Corn Growers, told the subcommittee the inland waterways system must have a plan for improving the reliability of the system and its infrastructure, and the Waterways Council proposed the Inland Waterways Capital Development Plan to achieve that goal. Witnesses said the plan will streamline and make more efficient federal outlays for lock and dam refurbishment and construction. One example of current inefficiency given was the Olmsted Lock & Dam Project on the Ohio River, authorized by Congress in 1998 with a budget of $775 million and a 12-year completion target. The Olmsted lock work has yet to be completed and the cost so far is $2.1 billion.
Over 60% of Canadian prairie wheat farmers and 51% of barley producers voted last week to retain the marketing monopoly of the Canadian Wheat Board, but Agriculture Minister Gerry Ritz says he doesn’t care about the vote; he’s going to change the marketing law and eliminate the monopoly anyway. The vote, paid for by the Wheat Board because Ritz would not fund the effort, saw overall participation by about 55% of all Canadian wheat farmers and about 47% of all barley farmers. “Regardless of the plebiscite results, at the end of the day, every farmer will have the right to choose how they market their grain,” Ritz said. The federal position is supported by the governments of British Columbia, Alberta and Saskatchewan, while the Wheat Board’s position is supported by the government of Manitoba, which believes the farmers, not the federal government, should decide the Wheat Board’s future.