October 23, 2011
Last Monday, the Republican and Democratic leadership of the House and Senate Agriculture Committees sent a letter to the Joint Select Committee on Deficit Reduction suggesting a net $23 billion cut in mandatory farm bill spending over the next decade as their collective recommendation to the Joint Select Committee (hereafter referred to as the Super Committee) that is tasked with finding $1.2 trillion in government-wide cuts or revenue increases over the next decade by Thanksgiving.
As we reported on Monday, the expected quid pro quo for suggesting cuts of that magnitude was the chance for the Agriculture Committees to write the policy that will yield that net cut themselves, rather than leave the policy making up to the Super Committee. The farm bill proposal is to be submitted by November 1.
Whether or not such an actual deal exists or not is unknown, and if it does, those in the know are not talking. If there is not a deal, the Super Committee could accept, reject, or modify the farm bill proposal as submitted, including lowering or raising the level of deficit reducing savings and substituting different policies.
Having sent off the joint letter, the staffs of the two Agriculture Committees hunkered down all week to stitch together a farm bill in what, if successful, would be record time. Due to the brief two week window, none of the normal congressional processes for farm bills or other major legislation are being used — no hearings, circulated bill drafts, mark-ups in which committee members get to offer amendments, etc. The primary activity has all been behind closed doors and has for the most part only involved the staff of the chairs and ranking members, not the members (and their staffs) who make up the rank and file of the two committees.
The Super Committee too has been meeting regularly but primarily behind closed doors. The 12 Representatives and Senators in those meetings have also maintained a very careful public gag order about any substantive discussions going on inside the room.
Dueling Letters, Proposals and Amendments
In part due to the unusual process, the week has also been heavy with organizations and coalitions sending letters to the Agriculture and Super Committees. In one of the more unusual flurry of letters, the American Farm Bureau Federation sent a letter on Monday arguing against adoption of a shallow loss revenue insurance program of the type widely assumed to be the leading contender as the replacement for direct and counter-cyclical payments in the discussions on how to achieve the $23 billion net reduction. About $15 billion of the $25-27 billion in total cuts (that will net $23 billion) is expected to come from commodity program subsidies, with the balance expected to come from conservation programs and nutrition assistance for low-income families.
The Farm Bureau argues that shallow loss revenue insurance would encourage farmers to take on more risk than the market would otherwise indicate, subsidize farm consolidation, increase barriers to entry to beginning farmers, and penalize crop diversification. Interestingly, that critique matches very closely NSAC’s critique of the current farm program, though the Bureau seemingly only meant to point a finger at the newer shallow loss proposals.
By Wednesday, the National Corn Growers Association, American Soybean Associate, and National Farmers Union responded to the Farm Bureau letter with their own joint letter defending shallow loss revenue insurance. Then, on Friday, the Farm Bureau issued its own farm program proposal which it calls Systemic Risk Reduction Program (SRRP). SRRP would have a coverage level of 70 to 80 percent of expected revenue, lower than the leading shallow loss proposals.
In another example of dueling proposals debated in an unusual manner, Senators Kirsten Gillibrand (D-NY) and Olympia Snowe (R-ME) held forth on an agricultural appropriations amendment on the Senate floor, the real intent of which was to express the disagreement with the dairy proposal put forward by House Agriculture Committee Ranking Member Collin Peterson (D-MN). Doing farm bill bidding on the appropriations bill is becoming more and more common as normal congressional procedures continue to breakdown and normal distinctions are blurred. This particular amendment, however, was more particularly in direct response to the closed door negotiating on the super fast farm bill, the dairy portion of which negotiation is being led by Peterson.
In a more normal farm bill debate, these types of back and forths would occur over a period of many months, as the Committees spend the better part of a year putting a farm bill together. Given the current fast track procedure, however, it is occurring in a more fast and furious manner, with little to no time for public debate or careful analysis.
No Limits to Taxpayer-Financed Supports
Interestingly, though perhaps not surprisingly, none of the proposals currently on the table for restructuring of the commodity or crop insurance titles of the farm bill include reform to the very badly broken payment limitation provisions. Commodity subsidies are in theory limited by law, but the law contains huge loopholes that allow single farms to collect nearly unlimited taxpayer subsidies. It is a system that keeps the lawyers and accountants hired by mega farms very happy, but forecloses on economic opportunity in farming.
Worse, the crop insurance subsidies — the 60 percent of farm insurance premiums paid by the taxpayer rather than the farmer — have no limit at all. Under current policy, one person or company could farm an entire county (or two or three!) and the taxpayer would be on the hook for both direct subsidies and insurance subsidies on each additional acre they consolidate and steal away from would-be new family farmers.
As we reported earlier this week, Senators Grassley (R-IA) and Johnson (D-SD) sent their own letter to the Super Committee a week ago arguing that any deficit reduction bill that cuts farm bill spending should include a hard per farm cap on subsidies. The two Senators’ Rural America Preservation Act of 2011 (S. 1161) would do just that with respect to commodity program subsidies. That bill caps the current array of commodity subsidies but can be easily redrafted to whatever new array of payments emerges from the Agriculture Committee this coming week. More importantly, it closes the egregious and pernicious loopholes which allow mega farms to abscond with taxpayer money they would otherwise not be entitled to.
NSAC strongly endorses this effort, and also supports extending the same policy to crop insurance subsidies, subsidies which are now even larger than commodity subsidies on both a per acre basis and a total federal taxpayer cost basis. We are urging the Agriculture Committees to include limits, but if that effort fails, we will also be urging the Super Committee to enact real reform on their own.
Beginning Farmer and Local and Regional Farms and Food Bills to be Introduced
With action on the farm bill moving (at least for now) at such a rapid pace, members of the House and Senate are getting ready to introduce two major new bills this week. One contains major rewrites of programs and policies to assist young and beginning farmers get started in agriculture. Another proposes a comprehensive set of revisions and additions to farm bill programs to help renew local and regional farm and food systems. Both bills promote new opportunities in farming and increase rural job creation and economic growth. Both also renew funding for farm bill programs that currently have mandatory funding but which do not have secure funding after fiscal year 2012. NSAC intends to endorse both bills and will work to see them both included in the new farm bill that may be emerging a year early through the Super Committee process.
Special endnote about revenue insurance terms
Based on calls we have been receiving, we understand that the terminology used in the current debate has become very confusing. The leading commodity subsidy proposals are called revenue insurance. The favored form of crop insurance today is also called revenue insurance. So it is difficult to know which kind of revenue insurance someone is talking about when they just say revenue insurance. Hence the adoption of the new terms shallow loss insurance for the commodity program version and deeper loss insurance for the crop insurance version. Another way to think about them, however, is to simply call the new revenue insurance proposals under review to replace previous forms as commodity payments “100 percent subsidized insurance” and the revenue insurance policies that have taken the place of traditional crop insurance as “60 percent subsidized insurance.” Observers of the debate are understandably confused. We hope that helps a bit!