Super Committee fails on deficit accord: Implications for upcoming Farm Bill

2011-12-01T09:00:00Z Super Committee fails on deficit accord: Implications for upcoming Farm BillBY JANE FYKSEN, CROPS EDITOR Agri-View
December 01, 2011 9:00 am  • 

Last week, Congress's Joint Select Committee on Deficit Reduction (tagged the "Super Committee") announced it was unable to reach bipartisan agreement for cutting the federal deficit; some $1.2 trillion in automatic cuts over 10 years are now scheduled to be implemented through a process known as "sequestration." Beginning in 2013, cuts will be made to most (but not all) government programs. According to the National Potato Council and others in agriculture, the immediate implications of the Super Committee's failure are "significant" to agriculture.

House and Senate Agriculture Committee leadership came together to identify $23 billion in cuts to USDA programs as part of a draft 2012 Farm Bill. The current Farm Bill is set to expire on Sept. 30, 2012. The Agriculture Committees were the only committees in Congress to offer bipartisan, bicameral deficit-cutting recommendations that the Super Committee had sought. Had the Super Committee been successful, NPC says the 2012 Farm Bill could have been passed before the end of the year. Now, the path forward for the 2012 Farm Bill is unclear. Although many possibilities exist, it is expected that the Farm Bill debate will now proceed through regular order in 2012.

In a joint statement last week, Frank Lucas and Debbi Stabenow, chairs of the House and Senate Ag Committees, vowed to craft a new Farm Bill in coming months "with the same bipartisan spirit that has historically defined the work of our committees."

The National Sustainable Agriculture Coalition (NSAC)-an alliance of grassroots organizations advocating for sustainability of agriculture, food systems, natural resources, and rural communities-details what's in store now for conservation programs. NSAC member-groups in Wisconsin include Grassworks, the Michael Fields Agricultural Institute at East Troy and the Spring Valley-based Midwest Organic Sustainable Education Service (MOSES).

The NSAC attempts to answer the question of "what happens next" with the budget and with the farm bill and outlines the basic contours of the "Farm Bill that wasn't," detailing what the coalition views as some of the more hopeful elements and what it views as some of the least positive.

NSAC says the threat of automatic cuts-divided half and half between defense spending and non-defense spending (but excluding tax expenditures, major entitlement programs, and most programs targeted to low-income households)-was originally intended to spur the Super Committee into a deal. "In the end, however, many on both the right and the left began to view the automatic cuts as the preferred option relative, on the right, to closing tax loopholes to increase revenue and, on the left, to cutting entitlement programs," report coalition analysts.

The one-year gap before "sequestration" kicks in now gives Congress a year in which to try to avoid it by coming up with an alternative to the Super Committee process for finding a trillion-dollar-plus-combination of spending cuts or revenue increases. The fact that 2012 is a presidential election year would tend to weigh heavily against a revived budget deal.

If sequestration can't be avoided, it'll have a major impact on the Farm Bill. According to Congressional Budget Office (CBO) estimates, the Farm Bill's share of the automatic cuts could be as high as $15.6 billion. While seemingly lower than the $23 billion in net savings in the "Farm Bill deal that wasn't," it's actually quite equivalent, according to NSAC. That's because two programs in the Farm Bill are by law exempt from sequestration-food stamps and the Conservation Reserve Program (CRP). Within the $23 billion near-deal, those two programs accounted for $7.8 billion of the savings.

NSAC notes, though, there are two important differences between an automatic Farm Bill cut and a non-automatic decision by Congress. With automatic cuts, the biggest share of the $15-billion-plus reduction would fall on Risk Management Agency-administered crop and revenue insurance since it has the biggest budget ($8 billion a year on average). Under most regular Farm Bill scenarios, crop insurance is less likely to be cut. Further, with CRP exempt, the total cut to conservation programs would be lower under sequestration than it would have been under the near-deal Farm Bill.

So what's apt to happen with the Farm Bill in 2012? It could be taken up early and finished before all attention focuses on the elections, or the process could start over from scratch. In either case, there might be a continued goal of cutting total Farm Bill spending by $23 billion over 10 years.

The NSAC sees at least four things tending to weigh toward a one-year extension of the existing Farm Bill and delaying work on a new one until 2013.

"First, the overall budget situation is confusing and without knowing how much to cut, the Agriculture Committees could start down the wrong path and turn out to be out of sync with a long-term deficit reduction deal. Second, if a reduced-cost Farm Bill is written and becomes law in 2012, but sequestration is allowed to move ahead as per current law, then the new Farm Bill would be cut a second time barely before the ink has dried on the actual farm bill. A 2013 Farm Bill, on the other hand, would have the advantage of being able to revise the shape of the automatic cuts before they go into effect permanently," the NSAC reports.

"Third, it is an election year and legislative time will be short, with interruptions for primaries and campaigning. Fourth, for those Agriculture Committee Republicans who may assume their party will regain control of the Senate in the November election, there is also a strong incentive to wait a year."

NSAC freely admits, however, that at this point in time, it's anybody's guess what'll transpire.

The coalition knows some things about "the Farm Bill that did not happen" that may serve as key clues about a new proposed Farm Bill:

There's support for "local food systems" and community-based food projects in low-income communities in particular. The same goes for beginning farmer grants to entities offering training and outreach to new producers. Organic agriculture would have also fared pretty well.

If the Committees' proposed Farm Bill had become law, the total cut to the Conservation Title would be $6.3 billion over 10 years, with roughly 60 percent of the cut to conservation ($3.8 billion) coming from the CRP. The program's total acreage cap would be ratcheted down over three years from its current level of 32 million acres to 25 million acres. To a significant degree, this reduction would track changes in CRP enrollment expected as a result of market forces, though with the declining cap the opportunity for new general sign-ups would be small. Related to CRP, $25 million in renewed funding would have been retained for the CRP-Transition Incentives Program, which offers a special incentive of two years of extra CRP rental payments to owners of land currently in the CRP but returning to production, who rent or sell to beginning or socially disadvantaged farmers who will use sustainable grazing practices, resource-conserving cropping systems, or transition to organic production.

The proposed bill would have cut the Conservation Stewardship Program (CSP) by about 10 percent. The average payment rate would have remained at $18 per acre; however the program's total acreage cap would be reduced to 10.34 million acres a year from 12.769.

The proposed bill would have combined the Environmental Quality Incentives Program (EQIP) and the Wildlife Habitat Incentives Program (WHIP) into a single program and cut total funding approximately 10 percent.

The commodity title of the proposed Farm Bill would have replaced direct payments (payments based on historical base acres and paid each year regardless of market price or farm income conditions) with a "grab bag" of commodity support options. Producers would be able to decide which program to enroll in.

One option included a farm-level shallow loss program to pay commodity crop producers when they experience small but long-term losses in revenue. Payments would cover losses between 13 and 25 percent, would be triggered by revenue circumstances at the individual farm level, and would be made on 60 percent of planted and prevented planted acres. It was expected that many corn, soy, and wheat producers would choose this option, though likely a considerably smaller percentage than if it were the only option available.

A second option was substantially higher target prices with ongoing receipt of counter cyclical payments when prices fall below the target, expected to be of most interest to rice, peanut, and sorghum producers, but perhaps many corn, soy, and especially wheat producers as well.

Due to the proposed termination of direct payments, saving nearly $5 billion a year, and to the relatively rosy projections of future commodity prices over the next decade, all of these commodity options could be put in the bill and estimated to result in a $15 billion savings over the next decade, or about $1.5 billion a year, reports this coalition. If, however, a substantial price drop occurred outside the predicted range, the taxpayer exposure could be very high, easily wiping out any savings.

Despite the call of over 50 national farm and conservation groups, including NSAC, to strengthen conservation compliance, the bill didn't reattach conservation to crop insurance.

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