By Dan Morgan- Dan is a special correspondent of The Washington Post and a Transatlantic Fellow at the German Marshall Fund of the United States. “Analysis from Washington” is posted exclusively at FarmPolicy.com.
I lost count of the times lawmakers used the word “reform” during this week’s final debate on the farm bill in the House and Senate.
It took House Agriculture Committee Chairman Collin Peterson (D-Minn.)–a Midwesterner with a seemingly incurable tendency to speak the honest truth–to give away the game. Except for some “minor changes,” the new farm program is “very much like the current law that we have been operating under,” he told the House on Wednesday.
That’s disappointing to those who thought the time was ripe for a new kind of farm safety net more aligned with the realities of 21st century American agriculture. What emerged instead was a farm program that invites another storm of negative editorials. The new program, like the old one, will continue to automatically channel $5 billion a year to a few hundred thousand farm households even if prices stay at record level. Such a policy won’t win broad public support and probably isn’t sustainable politically in the long run.
Even so, buried deep in this monster bill are what could be the seeds of change. A new program with the earthy acronym ACRE (for Average Crop Revenue Election) could represent the wave of the future. Starting in 2009, farmers will have an option of relinquishing some of the automatic payments and other supports in return for guarantees from the government. If their income from growing certain crops falls below what could normally be expected (state yields time the average national price for the crop), the government will make up the difference.
The provision is a pale shadow of what had been proposed by the National Corn Growers Association. In a globalized economy in which American workers increasingly have to fend for themselves, the notion of giving one privileged group a guaranteed revenue may not be an easy sell.
But ACRE is a breakthrough in several respects. It is a real safety that provides risk protection (along with crop insurance) for people who are actually farming. The current system of automatic payments is not a safety net. The checks arrive twice a year, regardless of whether weather is good or prices are high.
Some believe ACRE could be the start of a farm program overhaul that would eventually transform the current balkanized system of supports, subsidized crop insurance, price guarantees and free money into a “single payer” insurance system tailored to helping farmers manage legitimate risks.
Farm state politicians don’t have much good to say about ACRE, probably because it represents a threat to the status quo. Peterson has repeatedly disparaged it, questioning why anyone would sign up for it. But on the House floor Wednesday, he gave it a surprising, grudging nod.
“That may be the new future direction of the farm bill, depending on how it works out,” he said.
His comment was a sign of just how much Peterson has been worn down by the hard line taken by farm organizations and a few powerful senators who fought against even token cuts in the automatic cash payments to farmers.
Farmers in Peterson’s own northwest Minnesota congressional district will take home nearly $691 million in direct payments during the course of the new farm bill, according to the Environmental Work Group. Yet amid all the celebrating about the new farm bill, Peterson issued a warning to the farm bloc: “These direct payments are not a good way to do a safety net. It’s very hard to explain to our urban colleagues.”
Another section of the bill, long championed by Sen. Tom Harkin (D-Iowa) points the way to a new kind of farm policy that links federal payments to environmental improvements. In Europe, “single farm payments” that are the equivalent of the direct payments here come with environmental strings attached. The newly-named Conservation Stewardship Program edges toward that.
It creates a sizable pool of federal money –$1.1 billion to be disbursed over 10 years—that working farms could use to adopt or improve environmental practices. Thousands of farms will qualify, not just those growing staple crops. By 2018, 115 million acres – nearly a third of all farming acres — will be enrolled.
Any farm would be eligible, not just those growing staple crops. The World Trade Organization has ruled that these conservation payments don’t count against a country’s subsidy limits and can’t be challenged by trading partners. But the biggest plus may be political: the American public will support paying farmers generously if the nation is getting an environmental return.
None of that is much solace right now to critics of the current farm program.
The reformers turned out to be no match for a few powerful senators and Peterson, who protected—and added to–the hugely controversial subsidy system that Congress approved and the president ratified in 2002.
Although three quarters of the $300 billion in the bill go to nutrition, conservation, and energy programs, the politics of writing the bill is still driven by the farm program.
Under House rules, the Agriculture panel is a “minor” committee that is not required to be geographically representative. (There are six members from North Carolina and Georgia, none from New England.) The result is a panel unified behind the interests of farmers growing staple crops that collect the bulk of subsidies. This year, dairy interests did particularly well, snagging an extra $410 million to help cover rising feed costs, and imposing a 7.5 cents a pound fee on all imported dairy products to help finance domestic dairy promotion activities. The poultry industry in Virginia and Georgia beat back an attempt to deny crop insurance to Prairie Pothole farmers who plow virgin prairie lands to plant corn.
In effect, the aggies held a clinic on how to use the power of the purse to silence opposition to current farm subsidies. They heaped new money on anti-hunger groups, certain conservation programs, the biofuels industry, West Coast salmon fishermen, and even a few hundred farmers in Alaska.
Of more than 500 grass roots and advocacy groups lining up behind the farm bill, a majority were anti-hunger groups and food banks thrilled with the $10.4 billion in new money for nutrition programs. When the Bush administration sought to split the agriculture community by urging that growers of fruits and vegetables get a larger share of the pie, farm state lawmakers countered with more than $1 billion in new funds for research and marketing. In effect, the administration inadvertently created yet another lobby for the farm bill.
The bill took care of key Democratic constituencies such as low-income families on food stamps and fruit and vegetable growers in the home state of Speaker Nancy Pelosi (D-Calif.).
Pelosi’s performance came with an eye to shoring up the party’s support in rural America before the congressional elections. She disappointed those who thought she could have done more to pare back subsidies at a time of soaring farm incomes and rising food prices.
But a larger share of the blame may go to the White House. For all the Bush administration’s rhetoric about the need for more subsidy reform, it insisted on keeping or expanding the biggest subsidy of all—the $5 billion in automatic payments. That stand cost it the high ground in the end game of negotiations over the farm bill.
Had the administration agreed to a significant cut in the automatic payments—say $1 billion a year—it might have come to the table with a farm bill that used those savings for all the things the nutrition, conservation and fruits and vegetables lobbies wanted.
It could have advanced an alternative farm bill that moved in the direction of serious structural reform and still offered the interest groups what they wanted. Such an alliance might have given pause to the farm bloc. Instead, the administration chose an approach little different from what Congress was advocating.
Once it became clear the administration’s call for “reform” was hollow, Congress felt free to follow its own instincts.
I enjoyed reading Dan’s piece this morning. I do have profound doubts about ACRE amounting to any kind of major transformation of commodity politics and policy, but I guess time will tell. I do very much agree with the point at the end that much blame for the lack of reform (notwithstanding lots of editorials and more than a few news articles) lies at the foot of the Administration, both because, as you point out, their proposal called for increasing direct payments and they refused to ever concede on that, but also because, having gained significant leverage to influence the outcome of the bill, they never used it. At every key point in the final months they refused to negotiate, hanging payment reformers out to dry.
I wanted to point out two factual problems on the CSP comments. First, the $1.1 billion is the net increase in CSP dollars over the next 10 years. The total CSP funding over that time period is just over $12 billion. Second, while 115 million acres is about a third of cropland acres, pasture and rangeland acres are also eligible for CSP. From that perspective, it is closer to an eighth rather than a third of all eligible acres which can be enrolled given current funding levels.
It is probably reasonable to assume a higher sign-up rate in percentage terms for cropland relative to pasture and range, but it won’t get close to a third. From our perspective that is not necessarily a bad thing. The environmental standards for CSP are much higher than for conservation programs historically and much higher than EQIP today. Over time, if standards stay high and the funding remains with the program, there will be a very strong, lasting signal for positive conservation improvement. But it needs to build steadily over time. If too many acres could get in from the get go, it would mean accepting lower environmental standards in order to fill out the card.
By the way, the criteria by which USDA will determine who gets into the program in any given year is specified in the statute. There are five factors:
1. The farmer’s current level of conservation achievement related to the priority resource concerns in the area;
2. The degree to which the farmer’s proposal calls increasing conservation performance with respect to those priority resource concerns;
3. The number of priority resource concerns the farmer is willing to address to meet or exceed high standards set by USDA;
4. The extent to which the farmer is willing to address other resource concerns, in addition to the priority concerns, to meet or exceed high standards set by USDA;
5. The extent to which all of these environmental benefits are provided at least cost relative to other similarly beneficial bids.
(Note: with respect to #3 – to be eligible, the farmer must already be meeting or exceeding the high standards set by USDA for one priority resource of concern and also must agree to address a second priority resource of concern to that high standard by the end of the first 5 year contract – however, ranking criteria #3 will tend to favor farmers doing comprehensive conservation, sometimes referred to as total resource management systems).
(Also note that the farmer must enroll the entire farming operation; there is no opportunity to “cherry pick” particular fields that may have fewer problems and therefore would be easier to qualify).
I have many thoughts about how CSP in combination with other commodity and conservation program changes (and WTO green box improvements) could yield a workable long-term green payments alternative to the current hodge-podge of program and market distortions, but that is for another time….
By Dan Morgan- Dan is a special correspondent of The Washington Post and a Transatlantic Fellow at the German Marshall Fund of the United States. “Analysis from Washington” is posted exclusively at FarmPolicy.com.
The House and Senate batted farm bill proposals back and forth last week, squabbling over such familiar sticking points as payment limits, disaster aid and faster depreciation for farm equipment.
The quarreling, though, seems increasingly detached from the monumental changes that are sweeping through American agriculture—from corn replacing cotton in parts of Mississippi, spring wheat contracts hitting $20 a bushel on the Minneapolis Grain Exchange, and empty grain elevators in the Dakotas.
It isn’t entirely the lawmakers’ fault that their labor has been overtaken by events. When they began work on a new farm bill two years ago, the problems were the traditional ones: stagnant commodity prices and flat farm income. Key farm state lawmakers girded themselves for a traditional battle defending traditional subsidies. They’re still waging that fight, but everything has changed, creating a new set of issues and choices.
What’s the best policy for a world in which food and fuel are competing for acres? With corn prices at or near $6 a bushel, should the U.S. be subsidizing both the ethanol industry and corn growers? Does it make sense for Congress to allocate 85 percent of the U.S. sugar market to beet and cane growers when those acres may be needed for corn and wheat? Is it possible to meet global demands for crops without sacrificing habitat, soil and even the climate?
These are big questions, but they haven’t much entered the farm bill debate, now mired in parochial battling.
The impasse has led some to suggest the unthinkable: This could be the last farm bill of its kind, and perhaps even the last farm bill.
That possibility was advanced privately last week by several serious policy analysts and former senior government officials attending Informa Economics, Inc.’s annual conference on food and agriculture policy in Arlington, Va.
Imagine, they suggested, that the current high prices are not just a blip but a permanent new condition, much like high oil prices. In that case, the commodity title of the farm bill will look increasingly irrelevant. Government price guarantees will no longer be operative at their current levels, and the billions of dollars in direct payments to farmers will become politically unsupportable. In place of the 70-year old system of supports and guarantees, Congress will impose a new safety net operated by private crop insurance companies, though still subsidized by the government.
The House Agriculture Committee’s new farm bill version unveiled last week includes an optional program for farmers providing for scaled-back government payments and other benefits, in return for insurance against both low prices and bad weather. Though backed by corn grower organizations, it gets little respect from farm bloc members.
Committee Chairman Collin Peterson told reporters last week he couldn’t imagine why many farmers would sign up for it.
Still, this year’s impasse over the farm bill may be a sign that fundamental change can’t be postponed much longer.
The agriculture committees are beginning to lose control of the debate. By refusing to consider shifting some $50 billion in direct farm payments to other priorities, the agriculture committees have had to beg money from Congress’s powerful tax and revenue committees in order to fund other priorities. Those committees are now extracting their pound of flesh.
House Ways and Means Committee Chairman Charles Rangel (D-N.Y.) wants a $9 billion increase in food stamp spending as a condition of his help. Senate Finance Committee Chairman Max Baucus (D-Mont.) is unyielding in his demand for a $4.1 billion disaster program. He is also proposing a tax change that would give his committee jurisdiction over the nation’s principal soil and habitat conservation program.
The “aggies” may yet get the money, but only at the price of relinquishing some power.
Already, energy, environmental and agriculture policy are merging, so that the agriculture committees alone no longer control the destiny of American farmers. The newly-enacted energy bill gives the administrator of the Environmental Protection Agency huge new sway over the farm economy, including authority to waive biofuel requirements deemed to be hurting the environment or consumers.
In the new crops-for-energy economy of the Midwest, oil prices are as significant as wheat futures. And EPA’s global climate model, now in the works, could determine whether future ethanol and biodiesel plants qualify for tax credits and loan guarantees.
At the same time, the environmental policies the government chooses over the next months may have more of an impact on farm revenues than the fate of direct payments and traditional subsidies.
Pressure is increasing from many sides to fight shortages and food inflation by plowing virgin prairie and land now enrolled in the Conservation Reserve.
In the House, Congresswoman Stephanie Herseth Sandlin (D-S.D.) favors a “sod saver” program that would deny crop insurance for four years to farmers expanding into native prairie–prime habitat for pheasant and duck, and a natural grass bank for ranchers.
A bigger question is the fate of the 36 million acre Conservation Reserve, one of the premier environmental success stories of the last two decades.
Authorized acreage would shrink by more than 10 percent under Peterson’s proposal, and could fall even more unless the government raises payments to participating landowners to compete with the rents they can now get from farmers.
Pressure is mounting – from farmers, the baking industry, and agribusiness groups – to allow early withdrawal of land from the Reserve. Agriculture Secretary Ed Schaefer says he sees no need for such drastic action. But contracts on 4.5 million acres will expire next year, and many landowners are expected to return the land to commercial farming without higher payments from the government. (About a quarter of the land in the reserve now was formerly used to grow wheat, and prices of wheat are now at record levels.)
The public is entitled to a debate on the implications of the sweeping changes underway in U.S. and world agriculture. At this point, it looks as if it will have to wait.
***
Clarification: An earlier version of Dan’s article reported that the “sod saver” provision favored by Congresswoman Herseth Sandlin was not included in the new farm bill outline offered last week by Rep. Peterson. A committee spokeswoman said Monday that sod saver had been included in both the House and Senate versions of the legislation and Peterson’s proposal “makes no policy assumptions.” She added that the chairman’s “framework document contains a level of savings that presumes savings that would be achieved by the inclusion of a sod saver provision in the final conference agreement.”
By Dan Morgan- Dan is a special correspondent of The Washington Post and a Transatlantic Fellow at the German Marshall Fund of the United States. “Analysis from Washington” is posted exclusively at FarmPolicy.com.
The bakers of this country are hurting, and therein lies a warning about what may lie ahead for U.S. agriculture.
About 80 of them were in Washington last week, visiting congressional offices, the White House and U.S.D.A., and issuing a 3-point plan for alleviating the “current crisis” of high wheat prices and shortages.
The American Bakers Association favors slashing acreage in the Conservation Reserve Program to free more land for wheat production; waiving the just-enacted biofuel requirements if necessary to head off severe economic harm, and “giving priority to the needs of the domestic food industry” when U.S. wheat stocks drop too low.
Such a call for government intervention in the farm economy seems strangely anachronistic in today’s booming, globalized agriculture.
We’ve seen blips before. High commodity prices invariably cause a backlash from consumers, the livestock industry, advocates for the poor and importers overseas. They demand “action” from politicians to help ease prices and curb shortages. Farmers respond by increasing their crops. Soon enough the situation corrects itself and we’re back to low prices, surpluses and farmers saying, “We told you so.”
Yet what is occurring in the markets, and in American agriculture, feels different this time around. That’s why it’s important to take the bakers seriously.
Hundreds of millions of people in Asia are flooding into urban centers where they can be fed more easily by imports than by inefficient farmers in their own countries. Incomes are rising and people have the money to buy more bread, vegetable oils and meat, best supplied by global trade.
In the United States and Europe, stepped up requirements for the use of biofuels is another new factor that is building a higher floor under prices. (There was no such ethanol mandate when Congress wrote the last farm bill in 2002.)
Meanwhile, soaring oil prices are providing incentives for gasoline makers to blend cheaper domestic ethanol, quite aside from the biofuel mandates.
The result has been record commodity prices. Global stocks of edible oils – palm, rape, soy and sunflower – are at a 30-year low. Spring wheat prices topped $20 a bushel in the Minneapolis Grain Exchange. Some bakers fear the U.S. could soon run out of rye bread. U.S. supplies reportedly are tapped out, and millers are shopping in Europe for rye.
Come April and May, durum wheat growers in Arizona and California may be able to name their own price. There will be little or none left from the 2007 North American crop from which to make pasta flour.
The usual response to high prices and shortages is more production. In the early 1970s, Agriculture Secretary Earl Butz, exhorted farmers to plant “fencerow to fencerow” after Russian grain deals and severe drought sent prices soaring.
But there are limits now to what farmers can do. Yield increases have slowed, and in the case of wheat, they have lagged. Expanding acreage isn’t the obvious option it once was. Plowing idle land, or cutting forests to make way for row crops, releases vast amounts of carbon and could affect climate. As governments move toward tighter controls on carbon emissions, farming more acres may become problematic.
That’s what has begun to create pressures for a stronger government hand in agriculture after years of laissez-faire.
The recently passed energy bill took a significant step in that direction. The legislation set aggressive requirements for gasoline manufactures to blend biofuels. But it also gave EPA, in consultation with U.S.D.A. and the Energy Department, authority to waive the requirements if they would “severely harm the economy of a state, region or the U.S.” or if domestic supplies proved inadequate.
EPA presumably can’t act yet, because it is yet to write the rules for this new law. But Congress made clear it wants the government to balance biofuels needs against other interests. “Trading independence from foreign oil for dependence on foreign sources of basic food is not in the best security interests of the country,” as the statement released last week by the American Bakers Association put it.
It is more likely that Congress will use high prices to nibble at conservation programs that have set aside vast tracts of farm country for wildlife habitat.
House Agriculture Committee Chairman Collin Peterson (D-Minn.) recently proposed an 18 percent cut in the 39.2 million acre Conservation Reserve, which pays landowners an annual rent for removing land from farming for 10 years.
The bakers support that, and they are also urging the U.S.D.A. to use its authority to waive penalties for farmers seeking an early release from their CRP contracts.
For that, the bakers have plenty of backing from agribusiness lobbies, including poultry, dairy, pork, beef, ethanol, corn sweeteners and flour, which favor increased supplies of raw materials and lower prices.
That isn’t the case with the bakers’ other proposal, which seems to imply more far-reaching supply management. It calls on USDA to “give priority to the needs of the domestic food industry” but without saying exactly how that would be done.
After Washington’s disastrous experience with export controls in the infamous 1980 embargo on grain sales to the Soviet Union, limiting sales abroad would be a desperate and unlikely move. But some kind of domestic grain reserve, perhaps modeled on the Strategic Petroleum Reserve, may not be completely implausible if inflationary pressures continue.
In most wheat growing nations and regions (except for the United States and European Union), governments view the wheat supply as too politically sensitive to leave solely to the whims of the international market. That has been evident in the current wheat shortage. Kazakhstan’s announcement last month that it was introducing export tariffs on wheat triggered a sharp jump in wheat prices worldwide, and will affect the price of bread in the United States.
Other major wheat growers, including Argentina, Russia, Ukraine and China, have taken some wheat off the world market to address supply shortfalls at home, according to a recent article in The Wall Street Journal.
“They represent a third of global wheat exports and they all restrict trade to some degree,” said Rich Feltes, senior vice president and director of commodity research at MF Global in Chicago.
That has left the United States, Canada and the EU as suppliers of last resort, and has ratcheted up prices for millers, bakers and consumers in those places.
“Our stocks here in the United States have literally been raided because of the export tariffs and controls that have been applied by government agencies in other wheat growing nations around the world,” said one wheat dealer.
Perhaps the high grain prices are just another blip, as many farmers now contend. But if they are not, the debate over managing U.S. supplies is likely to continue and intensify.
By Dan Morgan
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Posted by Keith Good • March, 17, 2008 • 3:35 am
By Dan Morgan- Dan is a special correspondent of The Washington Post and a Transatlantic Fellow at the German Marshall Fund of the United States. “Analysis from Washington” is posted exclusively at FarmPolicy.com.
Picture this hypothetical situation.
It is early 2009 and corn prices edge up to near $7 a bushel as U.S. ethanol plants and Asian traders bid for grain that is scarcer than expected after a disappointing 2008 harvest.
Responding to protests from U.S. consumers, the livestock industry and Asian customers, the new administrator of the Environmental Protection Agency, a Democrat, takes decisive action.
Using her broad authority under the 2007 energy bill, she waives the requirement that gasoline blenders use 11.1 billion gallons of corn ethanol in 2009. Unpopular as the action is in the Midwest, it breaks the corn price and eases inflationary pressures that are playing havoc with the U.S. economy.
Granted, it’s unlikely. The political consequences would be far reaching. Midwest voters still haven’t forgotten, or forgiven, Jimmy Carter’s 1979 grain embargo. And such dramatic action would scare off Wall Street investors needed to underwrite Washington’s huge bet on “advanced” biodiesel fuels.
But it isn’t entirely implausible, either.
American agriculture still hasn’t fully grasped the extent to which the energy bill shifted power over the farm economy to a corner of the executive branch where “production agriculture” has limited influence. In a Democratic administration attuned to the concerns of poor urban consumers and environmental groups, moderating food prices and protecting soil, water and air could take priority over hitting the ambitious biofuels targets in the energy bill.
Most commentary on the energy bill has focused on the broad outlines of what it does to require more fuel-efficient cars and require gasoline makers to drastically increase the use of ethanol and biodiesel fuels by 2022.
But this is a bill in which the Devil is truly in the details, complex as they are.
The biofuels provisions, for example, give the EPA administrator broad authority to scrap the annual requirements for corn ethanol, biodiesel and cellulosic ethanol that now underpin high commodity prices and soaring land values across the farm belt.
“In consultation with” USDA and the Energy Department, the administrator can waive the yearly requirements if she determines they would “severely harm the economy of a state, region or the United States” or finds that domestic supplies are inadequate to hit the target.
Much of the language in the new law was proposed by the Natural Resources Defense Council, and it reflects environmental priorities as much as those of the farming community.
“The only reason the environmental community is interested in biofuels is as a way to address global warming,” said Franz Matzner, NRDC’s chief forest and public lands advocate. The result, he added, was a good bill that allows a dramatic expansion of biofuels – but only if the increase can be achieved without harming water, soil, wildlife habitat and the climate.
The law, for example, gives EPA the job of establishing, within one year, the greenhouse gas baseline against which all new biofuels will be measured. Ethanol from corn won’t count unless EPA determines that growing, transporting and refining it emits 20 percent less carbon dioxide than a like quantity of gasoline. EPA must also consider “indirect” effects, such as carbon releases from cultivating virgin land or forest to replace corn diverted to fuel.
The Renewable Fuels Association signed off on this because most corn ethanol plants won’t have to meet that standard. The energy bill “grandfathers” 143 existing refineries and 64 new plants or additions under construction. Those plants will have a yearly capacity of 13.4 billion gallons, just shy of the 15 billion gallon ceiling set in the energy law.
However, future coal-fired refineries now on the drawing board probably won’t qualify, according to congressional aides familiar with the energy law. And refineries producing a new generation of cellulosic biofuels could face a much tougher challenge reaching the law’s 16 billion gallon requirement by 2022, according to industry experts.
These plants will qualify for generous federal loan guarantees and credits, but their ethanol won’t count against the requirement unless EPA finds that it is reducing greenhouse gases by 60 percent below the EPA baseline. (EPA can reduce that to 50 percent but no lower.)
Unless ethanol or other renewables count against the mandates in the energy law, refiners would have less incentive to purchase the product.
The details still have to be worked out, but all this gives EPA serious power over the farm economy, now heavily dependent on strong demand from the burgeoning biofuels industry. In effect, EPA now has principal responsibility for managing the demand for major crops. Indirectly, how it uses that authority will guide farmers’ decisions on plantings, a role once played by USDA.
A “crunch” could be coming sooner than we expect, according to Purdue University economist Wallace E. Tyner.
New ethanol refineries now rapidly coming on line guarantee an explosive growth in the demand for corn this year, he notes. He predicts production of at least 11 billion gallons of corn ethanol, up sharply from last year.
It will take some 25 million acres to grow enough corn to make that amount of ethanol, Tyner estimates. That is nearly 5 million more acres than were needed last year. But corn acreage this year is estimated to be down by three million acres. That explains why corn prices remain very high. How much higher they will go if the 2008 harvest is short is anybody’s guess.
Federal tinkering with the commodity markets seems out of the question in the next few months because EPA hasn’t yet written rules implementing the 2007 law—and this is an election year.
But with the ink on the new biofuels law signed in December still wet, it is already getting a second, closer look in Congress.
Sen. Jeff Bingaman (D-N.M.), chairman of the Energy and Natural Resources Committee, held a hearing in February to air concerns about the biofuels title which he said “some have suggested is flawed.”
Environmental lobbyists involved in writing the legislation made sure that biomass from public lands and national forests were put off limits to biofuel refineries that convert timber, brush and woodchips into cellulosic ethanol. Protecting public lands from raids by the biofuels industry was key to environmental support, said NRDC’s Matzner.
But Bingaman and Rep. Stephanie Herseth Sandlin (D-S.D.) want to reopen that issue. Herseth Sandlin’s congressional district encompasses the Black Hills National Forest.
Matzner said her bill would “remove all the safeguards that keep the energy bill from incentivizing the wholesale loss of our national forests…Her bill is saying we don’t want to have any safeguards.”
Congressional aides give Herseth Sandlin little chance of amending the energy bill anytime soon. It could only be done with the approval of Rep. John Dingell (D-Mich.), all-powerful chairman of the House Energy and Commerce Committee and czar of all clean air legislation.
But the conflict isn’t likely to go away as agriculture and forestry interests focus more closely on the extent to which Dingell, Bingaman and EPA now hold sway over their economic future.
By Dan Morgan
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Posted by Keith Good • February, 29, 2008 • 4:48 am
By Dan Morgan- Dan is a special correspondent of The Washington Post and a Transatlantic Fellow at the German Marshall Fund of the United States. “Analysis from Washington” is posted exclusively at FarmPolicy.com.
Democratic Sen. Kent Conrad (D-N.D.) was in a hurry to get millionaire businessman and former North Dakota Gov. Ed Schafer sworn into office Monday in time to bask in the pomp of sitting with the Cabinet at the State of the Union address.
It wasn’t just the close family ties. (Schafer is Conrad’s former brother-in-law and Schafer’s dad once offered to help Conrad with his college costs.) Conrad’s helping hand—resulting in Schafer’s hurry-up Senate confirmation by “unanimous consent” rather than by roll-call vote following debate—was political and strategic.
Farm bloc lawmakers urgently need more “flexibility” from the Bush administration in ending the impasse over a new farm bill and they hope Schafer will provide it.
More than a few of them welcomed President Bush’s decision to shove aside Acting Secretary Chuck Conner, deemed “very, very inflexible” by Conrad, and select an old political pal.
Supporters of the straight-talking Conner hoped Bush would name him secretary as a reward for the major role he has played in the drafting of the farm bill. Conner himself was bitterly disappointed.
As a former congressional staffer with long experience in Washington, Conner has been respectful of Congress—but also unawed. As the administration’s point man on farm policy, he has repeatedly warned that the White House will veto the new farm bill unless Congress toughens payment limits and removes new taxes on business now in the House and Senate-passed versions.
Schafer told senators at his Agriculture Committee hearing last week that he would champion national needs rather than state needs in his new role. But he promised to try to “narrow the gap between the legislative and executive branch.” Conrad suggested that his long-time friend could act as a kind of intermediary.
Schafer has already demonstrated some give. On his second full day in office, he called in a small group of reporters and hinted the administration might be willing to soften its position on payment limits.
The secretary said he was “not sure the administration’s positions on farm subsidy dollar limits and a ban on subsidies to farmers who make more than $200,000 in adjusted gross income should be final,” according to DTN.
Schafer is a Republican with ties to real estate, wireless communications, and consulting businesses in his home state.
Conrad is a Democrat. But in North Dakota’s tribal politics, members of both parties unite to protect the interests of the state’s Air Force bases, ranchers and farmers, and party labels don’t mean that much. As governor, Schafer fought as hard as any Democrat to get federal drought and “disaster” relief for North Dakota farmers.
In theory, the Bush administration has unprecedented leverage this year to influence the final shape of the farm bill. Typically, a White House threat to veto a farm bill is an idle one because so many Republicans stand ready to override the veto of such a popular measure.
That isn’t the case, though, with a farm bill vetoed because it contains “new taxes,” anathema to Republicans in an election year. Most House Republicans voted against the farm bill in July because it included revenue provisions. Democrats said they were merely closing loopholes, but GOP lawmakers protested they were new taxes.
Yet if Congress bows to the administration and strips out tax provisions and a host of budget gimmicks, there won’t be sufficient money to fund initiatives in nutrition, bioenergy, soil and water conservation, or new indirect aid for fruit and vegetable growers.
Without those add-ons, enthusiasm for a bill that continues or increases traditional farm programs in times of high commodity prices could wane fast in both bodies.
Right now, the House, Senate and administration are far apart. None of the plans they have put forward come close to meeting the budget limits without a resort to gimmickry or “new revenues.”
The administration’s farm bill, proposed a year ago, itself runs $8.5 billion above the amount allowed under budget rules, according to the Congressional Budget Office.
That is less than the respective $12.9 billion and $11.6 billion overruns for the House and Senate bills, according to CBO.
But the administration plan contains only a miniscule amount of new money for food stamps and child nutrition. To get the bill through the House, Democrats added $11.4 billion in extra spending for those priorities over the next decade. The new money—a signature accomplishment of the Democratic leadership—pays for increasing the standard deduction and raising the minimum food stamp benefit.
The Senate bill mandates similar steps, but uses a budget trick—pretending Congress will allow the new benefits to lapse after five years—to make its legislation appear less costly.
Even so, Senate Agriculture Committee Chairman Tom Harkin (D-Iowa) criticized the administration yesterday for refusing to offer compromises that could make everyone happy.
“I don’t know what the president’s game is,” he told reporters, noting that Bush “ratcheted up” the veto threat in his State of the Union message Monday night when he threatened to veto any legislation that raised taxes.
“The ‘my way or the highway’ stance of the White House is not helpful,” he said.
Meanwhile, time is becoming a factor.
Congress last year extended the old farm bill until March 15 to allow time to negotiate a compromise. That date could be extended again if an agreement seems near, but at that point negotiators might have to work with a new set of budget numbers.
CBO’s just-updated 10-year projections for commodity programs show their cost declining from the $75.6 billion seen as likely a year ago, to only $66.6 billion. That is mainly because CBO is predicting commodity prices will be higher than was thought a year ago, resulting in a further decline in government price guarantees and supports.
Once Congress votes to accept these projections—possibly in late March—farm bill negotiators will have even less ability to shift subsidy money to other priorities because they will have less money to play with in the commodity baseline.
One irony of the congressional budget system is that the current record high commodity prices serve to protect the existing web of price supports and price guarantees. Even if Congress slashes those rainy day subsidies, CBO won’t credit savings, since CBO sees prices staying well above the existing subsidy floor most of the time. This leaves Congress with little budgetary incentive to make reforms.
(CBO projects that of the $66 billion in commodity costs between fiscal 2008 and 2017, only about $16 billion will go to traditional price supports and guarantees related to what farmers grow. The other $50 billion is accounted for by income support, known as direct payments, that goes to farmers automatically, regardless of prices.)
CBO’s new projections see federal crop insurance subsidies rising sharply, by as much as $14 billion over 10 years. (As farm prices rise, so do insurance premiums that are subsidized by USDA.) Congress could cut the subsidies and capture funds with which to pay for other priorities. But crop insurance subsidies have already been cut in the House and Senate-passed farm bills, and it isn’t clear how much more pain Congress is willing to inflict on the industry.
If the current farm bill expires without an extension, farm programs would automatically revert to those mandated in the 1949 law, a distant era when there were millions of working farms and horses still pulled some plows. Milk prices would immediately double and farmers might be required to idle cropland despite the present booming demand for commodities to supply people, livestock, export markets, and biodiesel plants.
All that in an election year when the government is fighting to stimulate economic growth and provide more help for the poor.
The Democratic chairmen of the House and Senate agricultural committees both insisted this week that there was a serious possibility of defaulting to the 1949 law unless the administration compromises.
Most think such a turn of events is highly implausible.
“It’s a game of chicken,” said a congressional staffer.
By Dan Morgan
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Posted by Keith Good • February, 1, 2008 • 4:36 am
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