The fiscal cliff, political climate, Farm Bill and nutrition programs - Nov. 27, 2012
“If we don’t do something about this fiscal cliff, 98 percent of Americans will pay more taxes on January 1,” Mary Kay Thatcher, American Farm Bureau Federation, Director, Congressional Relations, told members attending the Wyoming Farm Bureau Federation 93rd Annual Meeting held mid-November.
“It is not just about the rich people,” She continued. “It is about everybody.”
“We have expiring tax provisions, estate taxes, capital gains taxes going up, depreciation changes, alternative minimum taxes,” Thatcher explained. “The second part of the fiscal cliff is the idea of sequestration where Congress has said if they don’t do something by Jan. 1 then automatic spending cuts will kick in.”
“Going over the fiscal cliff eliminates $528 billion from the economy in 2013; that amounts to 3.3 percent of the economy,” Thatcher said.
Broken down this amounts to:
- Expiring tax extenders: $65 billion
- Medicare doctor “fix”: $11 billion
- Unemployment insurance: $26 billion
- Sequestration non-defense cuts: $55 billion
- Sequestration defense cuts: $55 billion
- Expiration of payroll tax holiday: $95 billion
- Income taxes, estate taxes, AMT: $221 billion
“In essence, the Medicare doctor fix has to be fixed or doctors get 27% less in payments come January 1,” She continued.
“With the election behind us, we have all endured election campaigning, a lot of ads and money spent and at the end of the day we came out very similar to where we were before the election,” Thatcher stated.
“While the numbers didn’t change much, we will have a much different Congress,” Thatcher said. “What we will see is a lot more polarization; you will see republicans in general being more conservative and democrats in general being more liberal.”
“I suspect passing laws will be even more difficult in the next two years,” She added.
Thatcher also pointed out in the House of Representatives there will be at least 80 new members of Congress. “Thirty-nine percent of the House of Representatives will have less than three years of experience when they come in on Jan. 3,” She said.
Between the election and the fiscal issues, Thatcher said it is difficult to get Congress focused on completing a Farm Bill before the end of the year. According to Thatcher, another challenge is newspaper headlines that paint an inaccurate picture for the American people. “For the last year and a half, newspaper headlines show that farmers are receiving record high prices,” Thatcher said. “We read about high sugar prices, high corn prices and more. People really think you are absolutely rich because they read the articles that talk about the highest farm income ever.”
“They have no idea about what you have paid for the inputs that go into the crop,” She continued. “They also have no comprehension about the fact that livestock producers might be feeding that $8 corn and so they feel you are rich and don’t need support.”
The Farm Bill
“The Senate passed a Farm Bill in June and the House Ag Committee passed one in July and we have been pushing since to get the House leadership to bring it to the floor,” Thatcher stated.
According to Thatcher, this Farm Bill has a trillion dollar cost for the next ten years. “The vast majority, 78 percent, is for nutrition programs which include food programs, school lunch, WIC programs, etc.,” She explained. “And food stamps are the major issue that is holding up the Farm Bill.”
Seven percent of the Farm Bill is for commodity programs such as direct payments and marketing loans; seven percent for conservation programs and nine percent is for crop insurance.
Setting commodities and nutrition aside, the two bills are very similar bills, according to Thatcher. Thatcher explained the differences in the House and Senate Farm Bills. The cuts in the bills look like this:
- Commodities: Senate cuts 25 percent; House Ag Committee cuts 28 percent
- Conservation: Senate cuts 10 percent; House Ag Committee cuts 9 percent
- Nutrition: Senate cuts 1/10 of one percent; House Ag Committee cuts 2/10 of one percent.
“The nutrition folks won’t give on the cuts,” Thatcher said. “The cuts amount to $16 billion out of almost $800 billion over the next ten years.”
Food stamp participation
“Participation in food stamps has increased and the cost has doubled since President Obama took office,” Thatcher said. “When you have eight percent unemployment you are going to have more people on food stamps, but participation has also increased because they are truly going out and encouraging folks to sign up so they are getting more people signed up and therefore more cost to the program.”
According to Thatcher, there are 47 million people on food stamps and 9 million students get free and reduced lunches. “We are now at a point where 58 percent of the school children in this country get free school lunch and 73 percent get free breakfast,” Thatcher said. “Less than 1 in 5 kids pay for their lunch; there is a lot of free going around.”
Where we are now
Thatcher gave an overview of where the Farm Bill stands now in regards to agriculture programs:
- Conservation title to take 23 programs down to 13
- CRP to cap at 25 million acres by 2017
- 60% of EQIP to livestock producers would continue
- More money in research title than we’ve ever seen before
- Eliminated 100 programs not used
- Several new initiatives for young and beginning farmers
- Fruit and Vegetable Producer help
- HR 872 in the House Bill; which would prevent the Environmental Protection Agency from enacting regulation that you couldn’t spray pesticides on or near waters
- HSUS – Commerce Clause in HAC bill, a provision that would try and deal with the California Egg problem where the Humane Society of the United States (HSUS) came in and said you must regulate cage sizes and now California producers are having trouble competing with other producers and want the other states to follow same regulations. This amendment would ensure the commerce clause is followed and states cannot be required by other states to follow their laws.
- GIPSA elimination in HAC bill
- LFP, LIP, ELAP and TAP retroactive and extended
“One of the real problems with not passing a Farm Bill is there is no livestock assistance programs available,” Thatcher said. “We will have it in this Farm Bill if we get it done, but if not it will need done in an extension program.”
Move toward crop insurance
“The trend is to move away from direct payments and move towards crop insurance,” Thatcher explained. “Largely by design, members of Congress think it isn’t fair to send direct payments, but they are more comfortable with crop insurance where the farmer is paying for a portion of the insurance.”
Thatcher explained if the nutrition program is taken out of the equation, 40 percent of funding is spent on crop insurance, 28 percent on conservation, and 29 percent on commodities.
“But after this Farm Bill, by my numbers we will probably spend 53 percent of funding on the crop insurance program,” Thatcher stated. “If you are Congress and you are looking for money next year, you think about the crop insurance because that is where the money is.”
“The insurance varies, but if I talk to you about crop insurance program this year, the federal government pays 62 percent of your premiums and you pay 38 percent,” She said. “It was designed that way. We raise the premium subsidies every time there is a crop insurance program to help get to a sure thing rather than the need for ad hoc disaster assistance.”
“The trend is moving away from commodities so people need to be thinking about crop insurance since that is where we are moving and that is what will be available to you,” She concluded.
The Wyoming Farm Bureau Federation is the state’s largest general agriculture organization. The primary goals of the organization are to protect private property rights and help members achieve an equitable return on their investment.