Fiscal issues and the Farm Bill

Resolving budget matters may be favorable for new Farm Bill.


All eyes are on sequestration – automatic across-the-board 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.

Budget Wrangling

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 $24 billion.

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.

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