Farm Programs: More questions and ‘what-ifs’ on the new farm bill

February 08, 2008 11:48 am

— The U.S. House and Senate conference committee will likely begin work in early February to develop a compromise version of the new farm bill, based on the legislation that was passed by the U.S. House in July, and by the U.S. Senate in December.
After the conference committee works out the differences in the two bills, the revised version will be voted on again by both the House and Senate. If it passes both, it will then go to President Bush for his signature, before it becomes law.
If the president vetoes the legislation, the farm bill would go back to Congress for a potential veto override, or for Congress to make revisions, and then have another vote by the House and Senate.
In my last column, I examined some questions and answers regarding the finalization of a new farm bill, and some likely provisions that will be included in the final legislation.
Following are some additional questions that have been raised, and the best available answers regarding the finalization and implementation of the new farm bill.
Q: There is considerable disagreement between Congressional leaders and the Bush administration over certain provisions in the new farm bill, which has lead to a continued threat of a presidential veto. What are the provisions that could lead to a presidential veto?
A: There are three primary sections of the House and Senate versions that the administration has major concerns with that could result in a potential veto by President Bush. The primary concern is with tax increases, funding shifts and projected savings that are being proposed in the new farm bill to fund new or expanded farm bill provisions.
The Bush administration would also like to see farm program payments banned to any individual or business above a $200,000 “adjusted gross income.” Currently the AGI limit is $2.5 million, and would drop to $1 million in the House farm bill , or $750,000 in the Senate farm bill.
The Bush administration is also concerned with increases in target prices and Commodity Credit Corp. loan rates that are proposed for some crops in the new farm bill, including wheat and soybeans.
Q: What are the differences on the farm bill budget and financial issues?
A: It is estimated that the new farm bills passed by the U.S. House and Senate are anywhere from $8 billion to $37 billion over Congressional budget baselines for the five years of the legislation (2008-12), depending on the calculations that have been used.
Congress passed “pay-as-you-go” legislation to address the federal budget deficit, which requires Congress to offset any potential spending increases on federal programs with either budget reductions in other programs, or enhanced revenues from tax increases and other sources. The House and Senate proposed a variety of added revenue sources, tax and funding shifts and potential program savings to offset the proposed added funding required in the new farm bill. Many of these are opposed by the Bush administration. The new farm bill proposed by the administration is estimated to be about $6 billion to $8 billion over budget baselines.
Q: If the administration does not accept the Congressional budget offsets, or if the farm bill is vetoed by the president over budget issues, what alternatives does Congress have to bring the new farm bill within budget guidelines?
A: Assuming no additional or alternative sources of revenue can be found, there would likely have to be cuts and reductions in the programs being proposed in the new farm bill, by as much as $15 billion, by some estimates.
Following are some possibilities for program cuts and budget adjustments in the House and Senate versions to make the new farm bill more acceptable to the administration.
• Reduce all direct payments by 10 percent, which would save approximately $2.5 billion over five years and $5 billion over 10 years.
• Reduce spending for the Conservation Security Program in the Senate farm bill by $1 billion over five years.
• Reduce the added funding for food stamps and nutrition programs by $2 billion over five years. (House farm bill has an increase of over $11 billion for these programs.)
• Reduce or eliminate the proposed permanent disaster program provision that is in the Senate version, which is estimated to cost $5 billion over five years.
• Eliminate the extra $500 million that is being proposed to assist fruit and vegetable producers over the next five years.
• Try to find added revenue sources that are acceptable to the Bush administration to fund some of the additional programs in the new farm bill.
Q: What role does funding for food stamps and nutrition programs play in the farm bill funding problems?
A: Most Congressional leaders, as well as the administration, feel that food and nutrition programs included in the farm bill are vastly under-funded.
The U.S. House farm bill proposed $11.1 billion in extra funding for food stamps, while the Senate farm bill proposed $5.5 billion in added food stamp funding. The administration proposed an increase of only $600 million in food stamps over the next five years.
Funding for food and nutrition is the largest portion of the proposed $286 billion allocated for the new farm bill. Whatever the final increase in food stamps and nutrition program funding is, the spending increases must be offset by added revenues, or reductions in other programs, such as the Commodity Title.
Q: What would the impact be if President Bush vetoes the new farm bill?
A: If President Bush vetoes the farm bill, it will likely extend the timeline of the process for a new farm bill by several more weeks. Most experts feel that a veto override is quite possible in the U.S. Senate, but might be difficult in the U.S. House.
If the potential veto is not overridden by both the House and Senate, it would then have to go back through the process of developing a revised version of the bill that is acceptable to the Bush administration. Congress would still be forced to deal with the financial and budgetary issues related to the new farm bill, as well as payment limits and other issues.
The extended time frame would also make it more likely that additional farm bill amendments may be offered in Congress, which could further delay the passage. If a presidential veto occurs, there will likely be measures introduced in Congress to extend the current farm bill for the 2008 crop year.
Q: What are concerns with extending the current farm bill for one year or longer?
A: The commodity provisions in the current farm bill have been quite popular with farmers in many parts of the country, and with several commodities. This has lead some farm organization leaders, and some members of Congress to call for an extension of the current farm bill for one year (2008) or longer.
If the conference committee has trouble finalizing a new farm bill, or if the new farm bill is vetoed by the president, there will likely be a renewed push to extend the current farm bill, with planting season just around the corner.
The biggest concern is that delaying the passage of a new farm bill by one year or more could reduce the baseline funding for the new farm bill even more, which could lead to even larger cuts in the Commodity Title in the future. Also, there will be a new president, and several new members of Congress, in 2009 that would then deal with passage of a new farm bill, which may or may not help the process.
Q: Why is March 15 an important date?
A: Late in 2007, Congress passed a resolution extending funding for the current farm bill through March 15. If a new farm bill is not enacted by March 15, it could result in further reductions in the Congressional budget baseline for the new farm bill.
Q: What happens if a new farm bill is not passed, or if the current farm bill is not extended?
A: In that event, farm policy provisions would revert back to the so-called “permanent farm law” contained in the Agricultural Adjustment Act of 1938, and later refined in the Agricultural Act of 1949.
This legislation is suspended each time that a new farm bill is passed. If the 1949 Agricultural Act is enacted, there would be no direct payments, counter-cyclical payments, marketing loans or loan deficiency payments.
However, that legislation would establish support prices at 50 percent to 90 percent of parity prices for corn, wheat, cotton and other crops, excluding soybeans and oilseed crops. Parity prices are prices that are adjusted for inflation since 1910-14. There are provisions for acreage allotments and supply controls for wheat and cotton, but not for corn and other crops. Dairy support prices would be set at 75 percent to 90 percent of parity prices.
The Congressional Research Service has estimated that the current support prices under the “permanent farm law” would be $8.32 per bushel for wheat, $4.13/bu. for corn and $28 per hundredweight for milk. Permanent farm law is not likely to be enacted due to the high cost associated with the higher support prices, and the elimination of many good programs that have evolved over the past several decades.
However, the threat of implementation of the “permanent farm law” does encourage members of Congress and the administration to try to reach an agreement on a new farm bill.
Q: Will there be any changes in the administration’s stance on the new farm bill, now that a new U.S. secretary of agriculture has been confirmed?
A: Ed Schafer, former governor of North Dakota, has been confirmed as the new U.S. secretary of agriculture, replacing Mike Johanns, who resigned in 2007.
U.S. Department of Agriculture Deputy Secretary Chuck Conner has served as the acting secretary of agriculture for the past few months, and has been the “point person” regarding the Bush administration’s position on policies and provisions in the new farm bill. He is likely to continue in that role, and the administration is not likely to significantly change their position on key issues for the new farm bill under Schafer’s leadership.

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