Policy: 2010 Washington Outlook and Analysis

December 30, 2009 06:00 PM
The stubbornly high unemployment rate has kept consumers wary and prompted a host of actions by Washington to try and keep the economy from slipping more than it already has. Divisions are wide over how much those efforts have really helped, but it largely cements the U.S. economy as the top story of 2009 (as chosen by editors and news directors, according to the Associated Press). That's not over and it figures to dominate action in Washington during the next year, too.

The Economy: The House narrowly passed a $154 billion economic aid package and the Senate will be pressed to act early in 2010. That will put the focus on the behind-closed-doors negotiations if the conference process plays out much the same as it did in 2009 — relatively few public sessions and deals being brokered by Democratic leadership to produce a final package. But the economic situation could affect other items on the Washington agenda for 2010.

Health care reform:
House members approved their plan earlier while the Senate finalized its plans on Christmas Eve. Key for a final resolution on this area will be the House-Senate conference committee where deals will be cut to put together the final package.

Recall that health care was President Obama's signature issue on the campaign trail, so most expect he will pull out all stops (read that money) to accomplish that goal. Republicans in Congress think this will be a key issue for them in the 2010 elections. Already, some liberal House members are grousing they may be forced to "swallow" provisions in the Senate version of the bill that don't set well with many of them. 
One of the main issues will be the public option. And if that is not in the plan, some House members may balk. But inclusion could jeopardize support in the Senate.
Climate change: The Senate action on climate change is not scheduled to resume again until early in 2010 with committee action. So far, there has been no schedule set for when the Senate Finance or Agriculture Committees will consider the package.

There continue to be ongoing questions about the impacts of climate-change legislation, with USDA Secretary Tom Vilsack calling into question the analysis released by his own chief economist of the impacts that came from EPA. Vilsack as directed Joe Glauber to pow-wow with EPA to see what can be updated to produce additional analysis of the impacts.

Much of the focus has been on the startling conclusions generated by the Forest and Agriculture Sector Optimization Model (FASOM) model from Texas A&M University. That analysis showed that with carbon prices of $70 per ton in 2050, it could mean 59 million acres of crop and pasture land could be planted to trees -- including in the Corn Belt.

Meanwhile, EPA's endangerment finding on carbon dioxide and five other greenhouse gases (GHGs) has that agency poised to potentially start down the regulatory pathway on GHG emissions. But already, that finding hsa landed in court and there are others questioning the impacts if the regulatory route is what unfolds.
That regulatory threat is seen as being potentially a stick to get lawmakers to act on climate change. But some Washington observers indicate it could have just the opposite effect, particularly with 2010 elections looming.
Biofuels: EPA once again will hold considerable attention with ag interests in 2010.

E15: Still coming is a decision on the request by Growth Energy for EPA to allow 15% ethanol in the nation's fuel supply. EPA took its full 270 days to announce that it was punting the decision into 2010. EPA said in announcing their delay that they were awaiting results of tests on engines in 19 different vehicles. EPA noted in annoucning their delay that Iinitial data from two of those engines looked promising and that info from another 12 would come likely by the end of May.
Provided the additional data on engine impacts doesn't raise red/yellow flags, a 15% ethanol blend that would be limited to 2001 or newer vehicles seems most likely at this point.
RFS2 (Renewable Fuels Standard-2): The RFS-2 rule has made its way to the Office of Management and Budget (OMB), so it is at least progressing through the government regulatory framework.
The current rules have no provision for anything but corn-based ethanol.
Expectations are that there may also be some kind of delay in the requirements under the Energy Independence and Security Act to have cellulosic ethanol as part of the fuel supply.

Conservation Reserve Program (CRP): USDA held a series of listening sessions in September and October to gather public input as they develop a Supplemental Environmental Impact Statement (SEIS) relative to the venerable conservation program. USDA proposed two alternatives on the size of the CRP -- keeping it at 32 million acres or reducing the program to 24 million acres of land. Other keys include rental rates, which in many cases are below to well below comparable rent being paid for cropland.

Adjusted rates published by the National Ag Statistics Serve are one option. Also, limits on the level of acreage enrolled in each county may be addressed.

USDA plans a proposed SEIS in January 2010 with a comment period and a plan for a final proposal in April 2010.

Tax issues: Agriculture has a stake in two key tax provisions that again, lawmakers failed to address by the time 2009 came to a close.

Estate taxes:
The death tax will disappear on Jan. 1, 2010, but is currently to return in 2011 at a much lower exemption ($1 million) and higher tax rate (55%). Lawmakers couldn't agree on extending 2009 rates ($3.5 million per spouse exemption; 45% rate) permanently, for a year or even for a few months. (Click here for details from a December Top Producer article.)
Lawmakers will come back and retroactively put the tax in place, most likely at the 2009 levels, although some suggest that could lead to court challenges.

Biodiesel tax credit:
The $1-per-gallon credit expires Dec. 31, 2009. Key lawmakers such as Senate Finance Committee Chairman Max Baucus (D-Mont.) and ranking Republican Chuck Grassley (Iowa) back renewing the tax and pledge to pursue it when Congress returns in 2010. Biodiesel interests say without the tax credit the industry will lose still more jobs and be all but obliterated without its renewal.

Lawmakers should be able to put together a package of various tax provisions that need to be extended and this will be revived.

2010 Elections
Senate Ag Committee: The panel has five members up for re-election in 2010: Sens. Chuck Grassley (R-Iowa), John Thune (R-S.D.) Michael Bennet (D-Colo.), Pat Leahy (D-Vt.) and perhaps most importantly, Chair Blanche Lincoln (D-Ark.). Grassley and Thune are not expected to see much of a challenge or at least should successfully defeat any challengers. The same goes for Leahy who has been a fixture in his Senate seat since 1974. This is Bennet's first campaign since being appointed to the seat and he already potentially faces a primary challenge. Lincoln is said to be in a tight reelection bid already, a surprise to some who view her as a lawmaker that seeks compromise, winning praise for her work in the 2008 Farm Bill.

House Ag Committee: So far, only one member won't be back for the Congress that will be seated in 2011 -- Rep. Jerry Moran (R-Kan.), who is running for the U.S. Senate seat being vacated via the run for governor by Sen. Sam Brownback (R). Moran holds the third spot in terms of seniority on the panel and currently is the ranking Republican on the panel's key Subcommittee for General Farm Commodities and Risk Management

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