Washington Insider - Monday

By DTN's Washington Insider

Here's a quick monitor of Washington farm and trade policy issues from DTN's well-placed observer.

Continuing Resolution Readied for President's Signature

Legislation to prevent any lapse in government funding is headed to President Obama's desk after the House last Wednesday and the Senate last Thursday cleared the must-pass measure before both chambers adjourned until Nov. 12.

The White House said Obama will sign the continuing resolution quickly, well before the end of the government's fiscal year Sept. 30. Enactment of the CR will ensure federal funds continue to flow at current rates through Dec. 11.

Between now and when Congress returns, Senate staffers will remain busy bringing together a 12-bill omnibus appropriations package that will provide the balance of funds for the new fiscal year that begins Oct. 1. "It allows us also to lay the groundwork for an omnibus funding bill in December which would be a comprehensive funding bill, including all 12 appropriations," said Senate Appropriations Committee Chairwoman Barbara Mikulski, D-Md. "Also, it gives the president the fiscal resources to protect the nation, to deal with ISIL [the Islamic State], to make sure we support the needs of Ukraine and NATO, and also to work on a global basis to stamp out Ebola."

It remains to be seen whether Congress will want to work on the omnibus bill suggested by Sen. Mikulski when they return in November or if members will simply approve another continuing resolution that would fund the government until spring of 2015.

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Senate May Take Up 'Tax Extenders' Bill in Lame Duck Session

Senate Finance Committee Chairman Ron Wyden, D-Ore., plans to push a deal for a two-year extension of a number of already-expired tax provisions when Congress returns in November. Before leaving town last week for the campaign recess, Wyden told reporters that he remains committed to a two-year extenders deal, which he negotiated with the panel's ranking Republican, Sen. Orrin Hatch of Utah, and passed through the committee back in early April.

Lawmakers and lobbyists have predicted for months that the most likely scenario on extenders is a short-term deal to be passed during the lame-duck session following the November midterm elections. However, House Republicans are pressing for some permanent extensions, such as on the tax credit for research and experimentation, which is popular with lawmakers in both parties.

Lawmakers are also considering how tax extenders might be combined with Democratic efforts to pass legislation to curb corporate inversions, particularly in the Senate.

Congress may be in recess for the next two months, but work will continue on this and a number of other issues in the interim. However, since Congress has been unable to deal with these topics during the first nine months of 2014, there are doubts that members will be able to move bills through the legislative process in the 15 days scheduled before the end of the year.

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Washington Insider: Farm Bill Surprises

There is a good bit of surprise being registered now over several provisions in the farm bill, raising some moderately rude questions over what some of the congressional agriculture leaders were thinking when they insisted the Act was carefully vetted in all its aspects.

Perhaps the biggest surprise is the cost, although a few stalwart observers said all along the bill could cost far more than expected. In general, the land grant universities mostly said little about possible costs and swallowed the Congressional Budget Office calculations uncritically.

Now, as they grind through their data they are allowing as how the Act "could trigger far bigger payments to farmers for this year than was previously thought, primarily because of the steep drop in the price of corn," One report concluded that it is now possible that "payments could range as high as $8.4 billion," more than twice the amount CBO projected in April." And, cost estimates still seem to be rising.

The detail for individual commodities also was shocking for some — corn growers could be paid as much as $79 an acre, "about three times as much as they were getting annually under the old direct-payment system," Prof Carl Zulauf told the press. This estimate reflects heavily subsidies made through the new Agricultural Risk Coverage program, which pays when county revenue for a crop falls below a rolling five-year average.

Zulauf assumes most eligible farmers would sign up for ARC because it is a "no-brainer for 2014." The big payment for corn is "a combination of the steepness of the decline relative to recent years and simply the number of bushels we produce in corn," he commented.

A somewhat later study by Zulauf pegs total government payments this year at about $9.6 billion for corn, barley, soybean, rice, wheat and sorghum producers under the new subsidy programs.

Perhaps a key question is what is happening to ag leaders' credibility as the savings expected from the 2013 Act disappear and program after program ends up being dry-docked to fix some basic flaw in the mechanism. This includes cotton, for example, but also the nutrition eligibility rules intended to cut program spending sharply. However, states have easily and legally countered the effect of those rule changes so that savings will be far less than expected.

Senator Jeff Flake, R-Ariz., a longtime critic of farm programs, said the news reports on high costs did not surprise him. "I'm not shocked. The people who should have known better did know better and still we went forward with this. Any dip [in crop prices] is going to mean massive payouts. I hope this shakes people up and hopefully then we can go back in and fix it. This is a bad deal for the taxpayer." It also is a serious charge for congressional ag leaders to face.

Agriculture Secretary Tom Vilsack weighed in on reports of high costs and other problems in the Act with his usual acuity, calling any predictions for subsidy payments this year premature, but noting that farming is an extraordinarily risky business.

The Act's problems may not have rated large with Vilsack, but they did with much of the urban press — for example, Bloomberg editorialized, "When does a $23 billion spending cut result in no savings at all? When it's part of the U.S. farm bill." The bill was to end the old direct payments program, it said, but the "insurance subsidy is turning out to be even more bloated and wasteful than the old cash giveaways."

While it is not exactly clear who Sen. Flake had in mind when he hammered the "people who should have known better," but the group is fairly large and includes those who worked to expand the amount of production and market risk the government should bear, as well as those who paid little attention to lingering trade policy issues.

Producers may not like to hear it, but agriculture in its many forms now is widely seen by the U.S. public as too industrial, leaving too large an environmental footprint, careless of its consequences for potential antibiotic resistance and paying too little attention to animal welfare or the health effects of the foods produced. In addition it also is seen as hostile to popular urban fads like the local foods movement.

While these impressions appear frequently in the media, it is not clear how important they are. But a growing image as a large, somewhat out-of-control cost center increasingly dependent on government payouts may well be a different matter and could provide heavy baggage for future efforts on a range of important issues at both the state and national level, Washington Insider believes.

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