Agriculture at Crossroads in Congress (via Politico)

After two seasons of failure, American agriculture is at a genuine crossroads  in Congress.

Will it continue to be whittled down by the left and the right? Or  can it go up the middle with compromises that revive the urban-rural coalition  so important to past farm bills?

Embarrassed by last month’s collapse, House Republican leaders  have raised the stakes greatly with their proposal to split the five-year  package and require separate votes on the nutrition title and food stamps. Commodity and conservation  groups are almost uniformly opposed. But as lawmakers return this week,  agriculture is under pressure to stretch itself and embrace new ideas.

Nothing illustrates this better, perhaps, than the on-again, off-again debate  over updating the $2,000 asset test for food stamps, set first in the 1985 farm  bill.

Ronald Reagan was still in the White House, Sen. Jesse Helms (R-N.C.) a power  in agriculture. Corn sold near $2.55 a bushel. Farmland in Iowa cost less than  $1,000 an acre. John Deere would soon introduce its best-selling 4450 tractor at  a list price near $54,000.

Twenty-eight years later, the whole political and agriculture landscape has  changed. But the $2,000 asset test remains, ignored by most states but now  resurrected by House Republicans to wring savings from food stamps — retitled  the Supplemental Nutrition Assistance Program.

Hundreds of thousands of households, who that otherwise qualify for food aid,  would no longer be eligible. Parents, wanting to preserve some savings to meet  unanticipated housing or medical costs, would have to spend down their cash  reserves to below $2,000 to get back SNAP benefits for their children.

Among all the contradictions in the farm bill, this stands out the most,  because of the impact on the working poor and because assets are something all  farmers understand — given the fickle nature of their livelihood and the bankers  who control the loans needed to plant each year.

Indeed, corn is now selling at better than twice the price it commanded in  1985. Iowa farmland can fetch $8,000 an acre. The latest descendant of Deere’s  workhorse 4450 lists just under $200,000.

If adjusted for inflation, a $2,000 asset test in 1985 would be about $4,300  today. Do farmers expect that their target prices will be adjusted by the same  farm bill that is silent on an asset test for the working poor?

Yet, when House Agriculture Committee Chairman Frank Lucas (R-Okla.)  attempted to address this issue last year, he was pushed back by fellow  Republicans. The House Rules Committee blocked the only real attempt to go there  again on the floor: an amendment by freshman Rep. Suzan DelBene (D-Wash.), which  included a provision to double the allowed assets from $2,000 to $4,000 and  exempt family cars needed to get to work, for example.

The same leadership rule did make in order a far-reaching Republican food stamp amendment that  helped to bring down the larger farm bill.

Backed by Majority Leader Eric Cantor (R-Va.), the 17-page measure opened the  door for states to toughen work requirements for food stamp recipients and share any savings that might  result from culling the rolls. The partisan vote — just minutes before a vote on  the final bill — drove off Democratic support. And with 62 Republican nays, the  farm bill ended up 20 votes short of what was needed to get to conference with  the Senate.

Over the past week, there have been Republican discussions of simply striking  this amendment, sponsored by Rep. Steve Southerland (R-Fla.). That would almost  certainly exacerbate tensions on the right. And it’s not clear that it would be  enough to bring back angry Democrats.

The alternative two-bill approach — promoted by Cantor prior to  the Fourth of July recess — remains on the table and has been cheered by The  Heritage Foundation and editorial pages of The Wall Street Journal.

But Cantor’s own camp admits the risk is more failure. That’s doubly  dangerous for Speaker John Boehner (R-Ohio), who was stung by last month’s  defeat and badly wants to get the farm bill behind him, given the bigger fight  ahead over immigration reform.

Finding some compromise through the food stamp asset test poses its own  challenges: An update could require as much as $5 billion in new offsets to keep  faith with the House’s 10-year goal of $40 billion in new deficit reduction.

But the House only narrowly rejected far bigger cuts from crop insurance  subsidies last month. And there is the potential that a reform amendment could  draw back support from both parties for passage.

Republicans would still have $15 billion in SNAP savings — far more than they  can expect to get through the Senate. Democrats would have moved the needle back  toward the center and opened up the door to some discussion of crop insurance  costs.

No modern safety-net program has proved more important to agriculture than  crop insurance. But success is double-edged: As commodity prices have improved  for the farmer, premium costs have steadily increased because of the greater  liability to be insured.

At one level, it is a shared commitment by producers and taxpayers to protect  food production. But the government now shoulders 62 percent of the premium  costs on average — or about $7 billion in 2012.

Moreover, 62 percent is just that: an average. It belies a far more complex  subsidy structure than is outwardly apparent.

As a general rule, farmers pay a greater share — sometimes over 50 percent of  the premium cost — as they buy more protection. But for a standard 75 percent  coverage revenue policy, producers can pay anywhere from 45 percent of the premium cost to as  little as 23 percent depending on how the policy is structured.

Changes made in the 2008 farm bill added to this trend. Yet, for all the new  products available, there has been no serious attempt to go back and reexamine  the so-called CAT, or catastrophic policies, for which producers pay only  administrative fees.

An early crop insurance model dating to 1995, CAT coverage is more bare-bones  protection. But in 2012, taxpayers absorbed 100 percent of the premium cost,  $264 million, to cover almost $7.8 billion in liability for sometimes large,  wealthy operations. CAT would almost certainly have to be included in any  attempt to find savings from crop insurance.

Both with food  stamps and crop insurance, the White House has been surprisingly  unhelpful in generating reliable data to guide Congress. But President Barack  Obama’s 2014 budget estimates that $4.2 billion could be saved over 10 years by  asking all farmers to pay 3 percentage points more on any premium that is now  subsidized at a rate of more than 50 percent. Together with changes in CAT, this  would go a long way toward offsetting the cost of updating the food stamp asset test.

Farm and crop insurance lobbies are sure to resist. Already the  Senate and House farm bills cut commodity programs by doing away with the  current system of direct cash payments. Protecting crop insurance has become  almost a battle cry. The great fear is that Congress will keep going back to the  same well whenever it needs more savings.

That said, many in agriculture would have to consider the move if the end  product is a bipartisan farm bill. A closer look at data collected by the Risk  Management Agency, which oversees the crop insurance program, suggests the impact on  a farmer’s operating costs is manageable.

Calculations by POLITICO show that in 2012, the producer’s share of premiums  for 75 percent revenue protection coverage ran about $21 per acre for corn and  $17.20 for wheat. That translates into about 13 cents per bushel for corn and 39  cents per bushel for wheat based on recent yield trends.

In both cases, a 3 percentage point drop in the subsidy rate would be about a  9 percent increase for the farmer, but still a matter of pennies per bushel.

South Carolina Rep. Jim Clyburn, a Southern black Democrat and a member of  his party leadership, has been a go-to person for agriculture in the past for  farm bill support. But Clyburn is vehement now in his opposition to a two-bill  strategy.

“They may have the votes over there to pass it, but I don’t think you’ll get  much support out of Democrats,” he told POLITICO. “It is their way to do a  two-tier support system. I think we ought to treat low-income subsidies the same  way as we treat high-income subsidies. That’s all this is.”

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