November 22, 2011
After missing their original November 1 deadline, the House and Senate Agriculture Committee leaders continued to work on hammering out a deal on what might have become the 2011 Farm Bill. Things really heated up late Thursday and early Friday, November 18, when the new farm bill deal appeared imminent. Friday came and went, however, with the bill drafters still waiting on a final budget scoring on the bill from the Congressional Budget Office, delaying its official unveiling.
The Agriculture Committee leaders intended to send the bill to the Joint Select Committee on Deficit Reduction (the “Super Committee”) for inclusion in the big government-wide deficit reduction bill. By this past weekend, though, it became clear the Super Committee would not succeed in producing a budget bill for consideration by the full House and Senate in December.
With the Super Committee process now dead, the Agriculture Committee leadership on Monday decided to simply scrap the deal they had nearly reached and issue no details, no summary, no budget score, and no bill. Instead, House Chair Frank Lucas (R-OK) and Senate Chair Debbie Stabenow (D-MI) issued a simple statement, saying:
“House and Senate Agriculture Committee leaders developed a bipartisan, bicameral proposal for the Joint Select Committee on Deficit Reduction that would save $23 billion. However, the Joint Select Committee’s failure to reach a deal on an overall deficit reduction package effectively ends this effort. We are pleased we were able to work in a bipartisan way with committee members and agriculture stakeholders to generate sound ideas to cut spending by tens of billions while maintaining key priorities to grow the country’s agriculture economy. We will continue the process of reauthorizing the farm bill in the coming months, and will do so with the same bipartisan spirit that has historically defined the work of our committees.”
(Note: One downside of the decision to not release even a summary of the proposed deal is that an out of date and not completely accurate summary of the bill was distributed fairly widely on Friday. While helpful to a degree, it has also served to confuse people where the summary does not match later reports about what is in the bill.)
This “part one” post will attempt to answer the question of what happens next, with the budget and with the farm bill. A “part two” post will then outline the basic contours of the 2011 Farm Bill that wasn’t, and detail some of the more hopeful elements and some of the least positive elements.
What Happens Next – Next Year’s Budget Issues
By law, the failure of the Super Committee to produce a bill cutting the accumulated deficit by at least $1.2 trillion (over 10 years) triggers automatic budget cuts (known in budget-speak as “sequestration”) of the same $1.2 trillion over 10 year amount, but not starting until January 2013. 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 families and individuals — was originally intended as the threat hanging over the Super Committee that would force 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.
The one-year gap before sequestration takes effect gives Congress a year in which to try to avoid sequestration 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. The termination of the Bush-era tax cuts at the end of 2012, however, provides a counterweight. There is some talk about a deal based on a reduction in the automatic cuts to the defense budget plus continuation of the Bush-era tax cuts except for the wealthy. Whether that or any other iteration of a mega-deal is possible in a politically charged year remains to be seen.
If sequestration is not avoided and in fact does trigger, it will have a significant impact on the farm bill. The Congressional Budget Office estimates that the farm bill’s share of the automatic cuts could be as high as $15.6 billion (the Office of Management and Budget has made the actual determination of the size of the cut, but the White House refuses to release those figures). While seemingly lower than the $23 billion in net savings in the 2011 Farm Bill deal that wasn’t, it is actually quite equivalent. That is because two programs within the farm bill are by law exempt from sequestration – SNAP (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. With SNAP and CRP excluded, the sequestration route and the $23 billion savings route are about the same $15 billion plus in cuts.
Two important differences between an automatic farm bill cut and a non-automatic decision by Congress are worth noting. First, under 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 average). Under most regular farm bill scenarios, crop insurance is less likely to be cut. Second, with CRP exempt, the total cut to conservation programs would be lower under sequestration than it would have been under the near-deal on a 2011 Farm Bill.
What Happens Next – Immediate Budget Issues
More immediately, the lack of a Super Committee deal has removed a train from the legislative track on which several high cost freight cars were going to hitch a ride. Two relate to the President’s jobs bill. Extended unemployment benefits and the temporary reduction in payroll taxes both expire at the end of 2011. Also up for grabs is the annual, costly revision to the Alternative Minimum Tax (AMT) to avoid it from triggering at a level that would impact many middle-income households as well as the now regular annual adjustment to prevent government health care payments to doctors and hospitals from going down (sometimes referred to as the doc-fix). With just a month to go this year, these are big, costly items for which there is broad political support, but for which there will be major arguments about whether or not they must be paid for with reductions elsewhere in the budget and if so, where. On top of all that, Congress must still finish the majority of the FY 2012 appropriations bills. Expect a very contentious December!
What Happens Next – Farm Bill
There are many scenarios with respect to what might become of the next Farm Bill. The wildest one, and most unlikely of the lot, is that it would still happen in 2011, with the net cuts of $23 billion in the near-deal serving as an offset for a deal on unemployment benefits, payroll tax reductions, AMT adjustments, or the so-called doc-fix.
Scenarios for 2012 include two variations on taking it up early in 2012 and finishing it by summer, before nearly all attention focuses solely on the elections. Variation one would pick up where things left off, with the draft deal from last week serving as the initial draft that would then be open to amendment. Variation two would start the whole process over from scratch. And of course there would be combination approaches in which some pieces would start over, but others would start from where things left off.
Under either of those variations, there could be a continuation of the goal of cutting total farm bill spending by $23 billion over ten years, or that number could change. Also under either variation, there could be a return to more normal legislative process, with hearings, subcommittee and full committee markups, and floor amendments and floor votes, or there could be a continuation of a less open process, especially if there is a new deficit reduction budget deal that emerges in the meantime.
Another scenario for 2012 could be more of a wait and see approach, with the Agriculture Committees crafting a bill only after the dust settles on the mega-budget situation and deficit reduction targets are known or the situation with respect to automatic cuts in January 2013 changes or does not change. The problem with the wait and see approach is that, in an election year, they could run out of time to respond with a farm bill once the mega-deal on the budget comes into focus, if in fact it ever does.
At least four things tend to weigh toward a one-year extension of the existing farm bill and delay work on the new one until 2013. Two are budgetary and two are political.
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.
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.
There are also strong countervailing forces to the 2013 scenario. It is probably safe to say that at this particular point in time, no one really knows under which scenario the farm bill debate will play out. It may take time for the dust to settle and new strategies to emerge.