Latest CBO Report on Farm Bill Impacts a Turning Point in Debate

March 5, 2013 02:05 AM
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via a special arrangement with Informa Economics, Inc.

Under focus and likely changes ahead: revenue assurance, dairy and food stamps

NOTE: This column is copyrighted material, therefore reproduction or retransmission is prohibited under U.S. copyright laws.

Last week's Congressional Budget Office (CBO) analysis of how the February CBO baseline affects scoring for the farm bills proposed last year by the Senate and House Ag Committees appears to be a game changer that will likely force many changes in the months ahead, and a development that could actually lead to a quicker farm bill end zone than most observes currently think, but a farm bill far different than its stakeholders envisioned in 2012.

Importantly, congressional sources signal the CBO's February baseline could be the one that lawmakers will use to score updated farm bill proposals, rather than waiting for the more traditional use of the March CBO baseline. The reason is primarily due to the Obama administration's failure to release its Fiscal Year 2014 budget proposals, which were due by law the first Monday in February. The latest date for Obama's budget proposals is March 25.

Also important is that by the end of this week, Senate Budget Committee Chairwoman Patty Murray (D-Wash.) could release details of the coming Senate budget resolution, which may be marked up the week of March 11. If so, the Senate Agriculture Committee could finally get the budget savings figure it needs to announce and begin marking up a new farm bill. It will be interesting to see if Murray holds with last year's $23 billion net savings for a new farm bill. Based on CBO's latest scoring, the 2012 Senate farm bill now only saves $13 billion – thus the need for an additional $10 billion in savings, and perhaps more.

The 2013 version of the farm bill could be far different than the outdated and now too expensive 2012 version. The reasons for that include:

  • A combined revenue assurance and Supplemental Coverage Option (SCO) in Title I is simply too expensive – especially in the Senate bill. The shallow loss payments program may well be nixed or altered significantly in favor of focusing on allowing crop insurance, along with SCO, to be the premier Title I safety net for farmers. Reference/target prices are expected to remain because, based on CBO scores of the House bill, the costs were not impacted very much from the 2012 scoring.

  • Dairy policy: The cost of the gross margin program with “optional” supply management language has surged, so much so that it now appears that program has to be significantly changed to fit within coming budget constraints. The program pushed so hard by Rep. Collin Peterson (D-Minn.), and even the alternative approach suggested by Rep. Robert Goodlatte (R-Va.) and David Scott (D-Ga.), and the Senate-passed dairy language, all need a lot of changes to fit within budget parameters.

One observer said, “These CBO numbers remind me of the scene in the Wizard of Oz where the Great and Almighty Oz was exposed for who he was. The CBO numbers on dairy show that all three proposals cost money, rather than saving money, over ten years – the Senate-passed bill, the Goodlatte-Scott alternative in the House, and the Peterson proposal in the bill passed last year by the House Ag Committee. The Peterson proposal is by far the most expensive, costing almost $120 million more over ten years than the Senate proposal. The Goodlatte-Scott proposal costs almost the same as the Senate proposal, and is cheaper by over $100 million versus the Peterson plan. Bottom line: the idea that supply management is needed to stay within budget constraints has been exposed for what it is – a farce.”

Reps. Goodlatte and Scott released the following statement regarding the CBO's updated estimates of the costs of the Goodlatte/Scott Amendment to the Dairy Security Act.

“Last year, we offered an alternative dairy policy that would provide dairy producers with voluntary margin insurance protection that did not include administrative fees and was not tied to a new supply management program that manipulates dairy prices and penalizes consumers,” said Goodlatte and Scott. “This amendment provided for a viable safety net for producers without putting the government in the middle of market decisions.”

Goodlatte and Scott continued, “CBO’s updated score of the Farm Bill finds that our amendment would save $100 million over the Dairy Security Act as included in the dairy title of last year’s proposed House Farm Bill. We believe that the CBO score further proves that supply management does not work and our amendment will provide producers with a viable safety net without supply management and added producer fees. We look forward to continuing to work with Chairman Lucas and Ranking Member Peterson on common sense reforms for our nation’s dairy farmers.”

  • SNAP/food stamps: The Senate has a major problem because following CBO's update, the 2012 Senate farm bill now actually costs additional money rather than saving $4 billion in food stamp costs. The House farm bill version also showed reduced food stamp savings, but contacts signal they have already found a solution that would bring the savings back to the previously recommended $16 billion savings figure.

Shallow loss payments under focus. Record to near-record farm income for corn and soybean growers the past several years; the US government already subsidizing crop insurance buy-up premiums by 62 percent; and the US government's $16.4 trillion national debt are now teaming up with CBO's latest scoring of farm bill proposals to likely bring significant changes to the previously proposed farm bill safety net (especially shall loss payments pushed in the Senate), to dairy policy, and to food stamp funding.

Comments: It is now clear that it was the proposed policy changes and their interaction that have been exposed to be wanting by CBO's updated scoring. It is also why some farm-state lawmakers and farm and commodity group lobbyists wanted to rush the farm bill's conclusion last year. The updated scoring is also why some of those lobbyists are either contemplating or changing their farm bill proposals and lobbying efforts. It also underscores the role Mother Nature can play as the price scenarios envisaged in the February CBO update are certainly higher than those projected a year ago which resulted in a more favorable baseline for the farm bills to be scored against. As always, there are still plenty of question marks with the out-year projections as there are with any long-run outlook scenario. But for now, these are the numbers farm-state lawmakers and commodity organizations have to work with.

NOTE: This column is copyrighted material, therefore reproduction or retransmission is prohibited under U.S. copyright laws.






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