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By Lana Robinson
Field Editor
Agriculture has been directed to find $3 billion in savings in its mandatory programs—commodities, nutrition and conservation—over the next five years. That was the topic of discussion in a teleconference with Vernie Hubert, general counsel for the U.S. Senate Agriculture Committee, when members of the Texas Farm Bureau Farm Program Study Committee met in Waco in mid May.
The TFB committee, chaired by Dist. 13 State Director Bobby Nedbalek of Sinton, was appointed by TFB President Kenneth Dierschke and charged with the responsibility of looking at all aspects of farm policy in order to help guide the organization as crafting of the next farm bill begins. A representative of diverse agricultural interests from each of the Texas Farm Bureau's 13 districts makes up the committee. The purpose of the May 13 teleconference was to see if Texas Farm Bureau policy needs any changes or adjustments, while there is time to do so through the policy development process, to address budgetary proposals.
Hubert gave an overview of the Budget Reconciliation Conference Report and its implications for ag spending in the coming year. Both houses of Congress, at the end of April, narrowly approved a Fiscal Year 2006 budget resolution that would authorize $13.88 trillion for federal government initiatives. The measure, House Concurrent Resolution 95, establishes overall federal spending limits that will guide Congress as it funds federal departments and agencies. According to Hubert, the Budget Resolution also requires Congress to approve by Sept. 16, 2005, a FY2006 budget reconciliation package that would reduce overall mandatory spending as well as cut taxes.
"Under the FY2006 budget resolution, Congress must reduce mandatory agriculture spending by $3 billion over five years, $173 million of which must be cut in FY2006," Hubert reported.
Mandatory agriculture spending includes initiatives like the 2002 Farm Bill and the Food Stamp program. Congressional budget reconciliation rules give the House and Senate Agriculture Committees the responsibility of recommending how these reductions will be implemented, Hubert noted.
"Chairman Chambliss (Saxby Chambliss, R-GA) is looking at all areas under the jurisdiction of the Committee—nutrition, conservation and commodity programs—to find an equitable way to save what has been mandated over the five years. The guiding principle is to meet the objectives without undermining the current farm bill. The Committee is looking for surgical trims that can be made without undoing major programs."
Because recent agriculture spending was far below the projected spending, Hubert said those with oversight did not feel that it should be included in Budget Reconciliation.
"When is the last time you can think of that anyone has spent less—substantially less—than projected? That has created a lot of good will. That's why members of Congress don't want to undo it. Agriculture and all American have benefitted through the tax and economic policies pursued by the administration. However, those don't come without a cost, also," he suggested. "The over-arching concern is don't undo programs, but fit them into the budget. We've enjoyed relatively low interest rates, despite higher budget deficits that worry budget deficit hawks. The big push this time is to show financial interests that we can budget, and get spending under control."
Hubert said the committee is eyeing provisions—decoupling, counter-cyclical payments, and loan rate—to see if there is a way to determine their importance to producers.
"You can't construct a policy argument why one is more important than the other," he said. "If something needs to be shaved, which is it? Counter-cyclical, direct payment or loan rate? Where should people go to find savings? The Chairman is trying to prioritize conservation and nutrition programs, and has had a lot of consultation during the process. It's hard to come up with policy objectives to save money, but it must be done before September 16."
Hubert said the trick is to find an equitable way to cut spending from the three categories—nutrition, conservation, and commodities—but equity is a hard thing to define. He said there are some proposals in the administration's budget that give "serious concern" to Chairman Chambliss, and there are many things in it that he cannot support.
One TFB farm program study committee member asked if the committee had considered a pro-rata share of savings coming from each of the three areas—nutrition, conservation and commodities. Currently, commodity programs represent less than 24 percent of the budget, 60 percent goes to the food program, and the balance is conservation. However, Hubert said the farm bill was "front-end loaded." Initially, the breakdown was commodities, 65 percent; conservation, 23 percent; nutrition, 7 percent; and all other spending, 3 percent.
"The argument is you put substantially less in nutrition than you did in commodities," Hubert said. "Why should we do a pro rata share now? Then you will have those that say you are trying to balance the budget on the backs of the poor if you cut nutrition to help farmers. So it's not only what is equitable, but also, what is politically feasible?"
Hubert said decoupling government payments from production has some positives. It eliminates incentives to overproduce. It addresses depressed regional and global prices that are the result of overproduction in the major grain-growing regions of the world. Domestically, reducing production incentives tends to reduce supply, which raises commodity prices and lessens the need for farm income support.
"Producers like it. It's money in their pockets. They don't have to worry. They can plan on it every year. If you shave off savings there, it reduces farm income," Hubert observed. "From the WTO (World Trade Organization) side, you can make a GATT (General Agreement on Trade and Tariffs) argument that it is not trade-distorting. That's a positive. The negative is what are decoupled payments based on? 1985 yields, and 10 years before that? Critics ask what kind of sense does that make? That's the downside."
The loan rate, he said, is something to fall back on when prices are low, and it's also available when prices are trade distorting. He suggested that savings might be less painful to producers from this category.
"If you cut, you are cutting from projected spending. If prices are high, you may not see any reduction," he noted. "Crop insurance works hand in hand with counter-cyclical and the loan rate, when prices are low. From a policy standpoint, it's easier to explain to critics than decouple. I'd look at crop insurance. Is there something there that can be trimmed? Can you afford your insurance?"
TFB State Director Don Smith of Sulphur Springs, which is a big dairy area, asked a question about milk loss payments, and whether they are included in the budget.
"Well, you know, this money doesn't come out of thin air. You have to cut one commodity program to benefit another," said Hubert. The biggest concern is they (lawmakers) don't like the policy...It's a simple ledger issue. Every single plus you have, the minus has to get bigger to pay it. You'll have senators say, `I don't want to increase cotton cuts for milk payments.'"
Hubert said the Committee has to be extremely careful in how they craft the amendment.
"We've had some very nasty votes on payment limits on the Senate side. The administration's budget wasn't helpful in stamping that policy down.
Prior agriculture budget savings came from avoiding the counter-cyclical mechanism, which saved $15 to $18 billion, Hubert explained. However, the Congressional Budget Office (CBO) will not score prior savings.
TFB State Director Gary McGehee of Mertzon asked if money couldn't be saved by simply cracking down on the fraud and misuse that seems rampant in the nutrition program.
Hubert said the House side was more open to looking at that than the Senate side.
"One person's fraud and abuse is another person's policy," said Hubert. "Farm payments, for example. Is it really there in the amounts that you won't have to make other program changes? It's rhetoric, mostly. The other problem is the CBO won't score savings from fraud."
Another question was what would it mean if Step 2 money was eliminated to achieve budget reconciliation?
"The Committee is going to look to ya'll (producers)," Hubert said. "How important is this, for competition? What about organizations like the Cotton Council? What would it do to exports?"
Another TFB participant asked how the two Texas senators came down on farm spending issues.
"The Texas senators tend to align with Chairman Chambliss," Hubert said. "Georgia and Texas both have southern crops. But this is more of a Committee process, and neither are on the committee."
Allen Wilson, Calahan-Shackleford County Farm Bureau and TFB Farm Program Study Committee member, commented that if prices remain high, the loan rate should not be affected.
"That might be the place to cut," he said.
Another suggested that the areas where cuts are to be made are a foregone conclusion, and that the current process may be just a formality.
Hubert responded, "It is not accurate that the cuts that are going to be made have already been decided. They have to be made in the programs under our jurisdiction. Proposals to cut loan rates, zero out CSP (Conservation Security Program), cut nutrition program, counter-cyclical... So far, we have seen no coherent package that can be accepted by the Committee."
Steve Pringle, TFB legislative director, pointed out that CSP is considered mandatory, although it had received no funding.
"Ag research is not mandatory. It's discretionary," Pringle pointed out, adding that discretionary items are always subject to cuts.
With regard to discretionary spending, Hubert said the House and Senate Appropriations Committee has begun working on the individual appropriations bills that will fund discretionary programs. By law, these appropriations bills must be enacted before Oct. 1, 2005, the beginning of FY2006. The FY2006 Agriculture Appropriations bill is expected to be one of the first bills to be considered, he said.
House Ag Committee Chairman Bob Goodlatte, May 13, said, "I see the Committee's role in reconciliation as analogous to the manner in which the 2002 Farm Bill was written. By working together in an inclusive and bipartisan manner, weighing the diverse interests of production agriculture, trade, conservation, nutrition, research, and rural economic development, we were able to develop a farm bill that passed both Houses of Congress and secured a presidential signature. It is my intention to approach reconciliation in the same manner. Furthermore, I think the reconciliation process may prove to be a good indication of what we can expect to see during the drafting and deliberations of the next farm bill."
