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Budget Debate Takes New Turns, with Unclear Impact on Agriculture

January 24, 2013


Sometimes Washington spends a lot of time talking about how and when to proceed to looming big issues.  And sometimes those process and timing decisions are very important.  And sometimes the situation surrounding those process issues is very fluid.  This is one of those times.

Very quickly after the House GOP decided on a brand new strategy for the upcoming budget debate late last week, the White House and the Senate Democrats decided to accept the proposal as something of a victory.  This quick acceptance ensures its adoption … and ensures a major budget showdown in Arpil/May, with two intervening showdowns in February and in March.

But that only decides the timing question.  Now comes figuring out the much harder process and strategy questions.

A quick recap:

  • Last week, on a retreat in Williamsburg, the House GOP endorsed a plan to suspend the debt ceiling until May 18, also demanding that the Senate produce a budget resolution by April 15 or face a nearly two year delay in getting their paychecks.
  • Yesterday, the House passed that plan, but needed Democratic votes for the measure to prevail.  Thirty-three Republicans voted no, enough to doom the measure if Democrats united in opposition.  But 86 Democrats voted for the measure, which passed 285-144.
  • Also yesterday, Senate Budget Committee Chair Patty Murray (D-WA) signaled that the Senate Budget Committee would be putting together a budget resolution this year, something it did not do for several years including the past two when the binding Budget Control Act of 2011 substituted for the non-binding budget resolution.
  • Senate Majority Leader Harry Reid (D-NV) also said the Senate would quickly adopt the House measure, calling it a victory for Democrats and portraying the delayed paycheck provision as a silly gimmick.
  • Third leading Senate Democrat Chuck Schumer (D-NY) also has begun touting the strategy of working toward a “budget reconciliation” process in the budget bill adopted in May to deal with tax reform and revenue increases as well as spending cuts.  Under reconciliation, there is a fast track procedure to get multiple congressional committees to produce spending cut or revenue increase measures by the same date and then stitching the proposals together in a single bill that is not subject to filibuster in the Senate.  Whether or not to move to reconciliation remains a matter of great debate, though as we noted in an earlier post, it is probably the surest way of getting a new five-year farm bill enacted.
  • The White House has still not indicated when its new Fiscal Year 2014 budget proposal will be released, other than that it will be much later than the normal first Monday in February date.  There have been rumors about March, and even April, though no definitive word from the Administration.
  • Finally, back on the House side, promises have been made by the GOP leadership that, in return for most Republicans voting to delay the debt ceiling showdown, the House Fiscal Year 2014 budget resolution will include a proposed path to a balanced budget in ten years, by 2023.

On that last point, note that the House budget resolution from last year did not reach balance until 2040, despite including rosy assumptions and huge cuts and policy changes to entitlement programs such as food stamps and Medicaid and Medicare.  While the modest economic recovery and the tax increases included in the fiscal cliff deal reached at the very end of 2012 will improve the new budget forecast significantly, it nonetheless appears a near certainty that the House budget would have to repeat many of the same benefit cuts at much the same levels, if not increased levels, to reach balance in ten years.

Last year’s House budget proposed cuts to the SNAP or food stamp program of nearly $130 billion, versus the House Agriculture Committee’s proposed $16 billion cut and the Senate-passed $4 billion cut in the 2012 farm bill debate.  With SNAP cuts the number one reason why the full House never dealt with the farm bill last year, it is a near certainty that if the House budget returns to where it left off last year and if House GOP leaders hold fast to such a proposal, the chances for either a joint House-Senate budget resolution or a five-year farm bill this year are nil.

Sequestration

Then there is the matter of the looming $85 billion in automatic budget cuts scheduled to trigger on March 1.  In the past few days, as the new reality of a postponed debt ceiling showdown – with or without a joint budget resolution – has taken hold, many prominent members of Congress on both sides of the aisle have started talking about the inevitability of the automatic sequestration cuts actually being allowed to kick in.  Three schools of thought seemed to be emerging – some would try to stop it, some would allow the cuts to go into effect from March through May (ultimately to be replaced by a new budget deal), and some would allow the cuts to go into effect permanently.  It may take weeks before this precarious situation begins to sort itself out.

As we have reported previously, the sequester, if allowed to occur, would take a roughly $4 billion bite out of the farm bill commodity title baseline and a roughly $2 billion bite out of the farm bill conservation title baseline, with SNAP and crop insurance, the two biggest farm bill spending items, spared from any cuts.  A five-year farm bill written after sequestration takes effect would thus start over $6 billion in the hole on the two major titles of the bill where significant cuts were already assumed in the farm bills that were pending last year.

Agricultural appropriations would be hit with an across-the-board cut of about 5 percent, with the biggest cut in dollar terms falling on the Women, Infants and Children feeding program, followed by food safety spending, followed by research, rural development, international food aid, conservation, and farm credit.  As the term “automatic” cut implies, these would be meat ax, no program spared cuts, not targeted or finely tuned cuts.  Moreover, agencies faced with the prospects of enacting these cuts within just the seven months that will be remaining in the fiscal year will be very hard pressed to make the needed adjustments quickly enough.

Back in December, appropriators had quietly reconciled most of the House and Senate final spending bills for Fiscal Year 2013.  They held out some hope that Congress would deal with their omnibus spending measure before the holidays, rather than in March of this year as assumed by the six-month Continuing Resolution the government is currently functioning under.  That proved to be an elusive hope.

Now, unless action is taken in February to forestall the sequester, the Budget Control Act-based government discretionary spending level of $1.043 billion for Fiscal Year 2013 that was assumed during that quiet December conferencing of the House and Senate spending bills would go out the window, making the task of finalizing appropriations for 2013 by the end of March far more difficult.

In the case of the agriculture appropriations measure, it is already stealing significant amounts of farm bill mandatory funding in order to have enough funding available to cover USDA and FDA discretionary spending.  Sequestration would place additional backdoor pressure on farm bill spending via “changes to mandatory program spending” in the appropriations bill.

Whither Ag Appropriations and Farm Bill?

While all these interrelated budget dramas play themselves out, it is probably safe to assume that any real action on either a new five-year farm bill or on the Fiscal Year 2014 agricultural appropriations act is now effectively off until sometime after the May budget resolution and debt ceiling showdown.

On a potentially positive note, with major congressional action on budget matters on tap for February (sequestration bill) and March (spending bill), the leaders of the Agriculture Committees could lead the charge to use one of these legislative vehicles to correct the farm bill extension slapped together without their participation during the last two days of 2012.

Unlike the farm bill extension measure agreed to by Chairman Frank Lucas (R-OK) and Chairwoman Debbie Stabenow (D-MI) and introduced in the House on December 29, the final extension measure negotiated by Vice President Joe Biden and Senate Minority Leader Mitch McConnell (R-KY) failed to renew funding for an array of innovative, job-creating programs for rural development and renewable energy and for beginning, minority, organic, specialty crop, and direct market farmers.  It also failed to include disaster assistance for livestock and fruit producers, and failed to correct a previous congressional mistake that is curtailing the Conservation Stewardship Program sign-up this year.

If the Agriculture leaders seize the opportunity, the upcoming February budget bill represents the best chance to get back to their comprehensive farm bill extension rather than the selective extension slapped together and approved at the end of last year under the pressure of the fiscal cliff.


Categories: Budget and Appropriations, Farm Bill


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