Washington Insider -- Monday

Economists as Social Critics

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

Which Will Come First, Mid-Term Elections or Renewable Fuels Announcement?

The Energy Independence and Security Act that was signed into law in 2007 instructs the Environmental Protection Agency to announce by Nov. 30 each year the amount of renewable fuel that is required to be blended into the nation's gasoline supplies during the following calendar year. It is an instruction that not only is routinely ignored, but one that also has now become almost laughably late.

The Obama administration says it is trying to balance its support for renewable fuels with awareness of infrastructure constraints at gas stations as it finalizes targets for 2014 biofuel use. "But with only 11 weeks left in the year, the administration also needs to weigh oil refiners' ability to comply with the long-delayed requirements," one official told Reuters.

The final 2014 biofuel targets –– which were supposed to have been announced by Nov. 30, 2013 –– have been under review at the White House's Office of Management and Budget since August. Meanwhile, the head of the EPA division that oversees the renewable fuels program, says delays in finishing the targets are due to the program's complexity, further complicated by the fact that growth in U.S. fuel demand has not kept pace with the levels expected when Congress set the mandate in 2007.

So EPA, ethanol producers and oil refiners (who are responsible for blending ethanol with gasoline in compliance with EPA's mandate) all find themselves facing what will be in essence a retroactive directive going back to January 2014. EPA already has said the RFS for 2015 –– which is supposed to be announced in six weeks –– won't be ready until February 2015 at the earliest.

The program has turned into a bureaucratic nightmare that Congress could fix by revisiting the EISA law of 2007 and changing the renewable fuel mandates to more closely approximate the reality of the amount of fuel that actually is being consumed by the driving public. That won't happen, of course, because it would require well-hidden reserves of political courage on the part of Congress when the alternative, carping at EPA, is so much more attractive.

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EPA to Cut Workforce by 1 percent

And speaking of EPA, in a move that will please many congressional Republicans, the agency says the continuing "budgetary uncertainty" that it faces has led it to look to early retirements and buyouts to cut its overall workforce by 200 positions.

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A memorandum from then-acting Deputy Administrator Lisa Feldt that was obtained and reported by the Bloomberg BNA news service, indicates that the goal is to have all the buyouts completed by next Jan. 9.

Under the so-called "early outs," the government can temporarily lower the age and service requirements needed for federal employees to become eligible for retirement, while buyouts offer employees lump-sum payments up to $25,000 as incentives to voluntarily leave the federal government.

The agency has just over 16,000 employees, so the departure of 200 represents only a small step. But if Congress continues to reduce annual EPA appropriations, the pace of downsizing is likely to quicken.

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Washington Insider: Economists as Social Critics

U.S. agricultural economists have been catching some heat recently for their provincialism in supporting benefits for local producers and for close and undisclosed links to large insurers. Now, however, a new source of criticism has emerged. Choices magazine, the principal outreach vehicle of American Agricultural Economics Association did not focus on ag economist behavior, but did examine the main product of national ag economic policy in the form of the 2014 Farm Act in its third quarter 2014 issue.

The articles and summaries presented can only be characterized as scathing. The Act, the editors wrote in the summary, "appears mainly to be focused on transferring income to relatively wealthy farm families as well as some non-farm entities such as the U.S. mercantile marine and private insurance and reinsurance companies."

In fact, Choices says, the "assertions that are often put forward to argue for billions of dollars in taxpayer subsidies are false in almost every case." The sector now is "largely comprised of family farms that are made up of households that are far wealthier and that enjoy higher incomes than is the case for the overall non-farm economy…. In 2012, the median farm household realized income 34% higher than the median total income received by all U.S. households."

These transfers come, Choices says, at the expense of consumers and taxpayers, the long-run productivity of the agricultural sector and efficiently and effectively meeting humanitarian needs through reasonable reforms to international food aid programs.

The new Act does pay some attention to conservation issues, the magazine notes, and, relative to recent bills, does not intentionally reduce spending on public research and development programs. However, the series of current articles sends a surprisingly consistent message.

"Like many of its recent predecessors, and perhaps to an even greater degree, the 2014 Farm Bill does much in the short term to improve farm and landowner incomes and wealth, especially for wealthier households, but does too little to improve agricultural productivity or efficiently address important conservation issues, and is likely to adversely affect the ability of U.S. trade negotiators to obtain new welfare-increasing trade agreements."

And the legislation is "likely to have such adverse effects for consumers and taxpayers that, in the aggregate, it will almost certainly reduce the economic welfare of the average U.S. citizen," Choices says.

So, what does this mean? The Act was debated up and down for many months, and was fully caught up in the toxic politics of recent years. And, Choices charges, the economic basis for farm subsidies is the assumption that farms are "at an unfavorable financial position relative to non-farm small businesses" has not been tested.

Few of the criticisms now in Choices are new and most have been presented in one form or another for years. In addition, they can be expected to be met with outrage by advocates for one or another components of the Act — even though Choices magazine is unlikely bedside reading for participants in ag policy debates. Already, the criticisms of the dairy provisions have stimulated irate responses from the National Milk Producers' Federation. So, part of the effect that these Choices articles may have depends on the extent to which they are successfully defended in the second and third rounds of the debate that may be beginning.

And, there are some aspects to this dispute/debate that are especially worth watching. The Choices articles were written by a very significant group of heavyweights, many of them experts of longstanding and very high credibility. It will be surprising if they cave in to the expected bursts of rhetoric that have often characterized other such debates.

Second, Choices magazine is an institution with at least a little muscle and a group of subscribers who "buy ink by the barrel," as the saying goes — and, who may be willing and even eager to match their "black boxes" against those wheeled into formation by even battle-hardened advocate groups.

Third, this may well be a debate of the kind not seen is some time and is long overdue, observers say. So, it will be important to watch closely how these issues are formed and debated. While they are unlikely to change the current policies or programs, they could well lead to important changes in the future, Washington Insider believes.


Want to keep up with events in Washington and elsewhere throughout the day? See DTN Top Stories, our frequently updated summary of news developments of interest to producers. You can find DTN Top Stories in DTN Ag News, which is on the Main Menu on classic DTN products, on the News Menu on Farm Dayta, and on the News and Analysis Menu of DTN's newest Professional and Producer products. DTN Top Stories is also on the home page and news home page of online.dtn.com.

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(GH/CZ)

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