All eyes are on sequestration –
spending cuts scheduled to
kick-in March 1, and the expiration
of the Continuing Resolution that
keeps Uncle Sam going until March 27.
With half the cuts in defense and the
other half on domestic policies both parties
care about, Democrats thought Republicans
would be in a weakened position at
the bargaining table. However, Republicans
aren’t blinking as the administration
highlights the repercussions of sequestration,
claims Republicans say are exaggerated.
The reality is sequestration concerns
both parties although, apparently, not
enough to avoid it occurring.
Some estimate the cut to direct payments
will be about six percent. Crop
insurance will not be cut this year, and cuts
in future years may be challenged, since
there is a five-year contract in place.
Among the more controversial cuts is the
potential furloughing of meat inspectors.
Rep. Mike Conaway (R-TX), a champion
for American agriculture, argues USDA
has discretion to avoid this disruption.
Senate Democrats propose to delay
sequestration through January 2014 by
saving $110 billion, half from tax increases
and half from defense and agriculture
cuts by eliminating direct payments. Few
believe the proposal will pass, but it sends
a troubling message.
Republicans are debating whether to
delay consideration of a Continuing
Resolution to keep the government running
until after the sequester, so Congress
can fix the more extreme results.
The administration’s budget, expected
in March, may also send a troubling message,
with deeper cuts to agriculture, mainly
outside of food stamps. With Congress
at a stalemate over taxes and entitlements,
pressure may increase in other areas.
While the administration’s budgets are not
the law, they can give Congress bad ideas.
We have already seen Senate Budget
Committee Chairwoman Patty Murray’s
(D-WA) proposal to turn off sequestration
involving $27.5 billion in cuts to direct
payments. If this bill does not pass, the
cuts may be in the Senate’s budget, which
means the Agriculture Committee could be
expected to cut $27.5 billion instead of
House Budget Committee Chairman
Paul Ryan (R-WI) says he will balance the
budget in a decade rather than the longer
period under previous budgets, meaning
steeper cuts. Most cuts for the Agriculture
Committee could be to food stamps. This
may complicate the Farm Bill, with cuts
seen as excessive to Democrats and insufficient
to Republicans. The differences in
total cuts to agriculture and to food stamps
could also confound a House-Senate conference
and final passage.
Contracts Locked In
Many hope an agreement can be
reached on sequestration, the Continuing
Resolution, and the debt ceiling that allows
the Agriculture Committees to write a
Farm Bill with significant savings. An
agreement could create a pathway to completing
a bill. Thus, the House and Senate
Agriculture Committees are waiting to act
on a new Farm Bill until these issues are
settled (likely by April in the Senate and as
late as May in the House).
One favorable outcome to the budget
wrangling is the refusal of the Congressional
Budget Office to assign savings to
eliminating direct payments for 2013, in
part thanks to the secretary’s Feb. 19 signup
date that locks in contracts, providing
certainty to producers, many who relied on
direct payments to obtain financing.
There will be lots of twists and turns this
year. We are keeping an eye on things for
you and are working for a good result.
Please visit www.usarice.com.