The Farm Bill Cometh...Eventually

By Steve Kopperud, Policy Directions, Inc.

Farm bills are contentious legislation in a good year. But this is not a good year, and the effort is downright ugly, proving it’s a good thing we only wade through this swamp every five years or so.

It wasn’t at all pretty when the “compromised” House farm bill hit the floor July 26. While the House approved its 2007 farm bill on a vote of 231-191, it came only after House Agriculture Committee Ranking Member Bob Goodlatte (R-VA) tried and failed to send the bill back to committee to come up with a new scheme to pay for additional nutrition and energy programs. Goodlatte’s effort failed along party lines, 198-223.

Floor action on the bill began against a background of acrimony and GOP accusations of broken faith after Democrat leaders, in a post-committee move, added a tax package to pay for increased food stamp eligibility and benefits along with additional alternative energy spending. The package would impose a tax on the U.S. subsidiaries of foreign-owned companies and remove certain tax benefits from oil and gas companies. Goodlatte said the farm bill process had been a typical bipartisan effort, but now “pits farmers against the working class,” alleging the financing package jeopardizes nearly five million U.S. jobs and risks retaliation by foreign governments. Several Republican House Agriculture Committee members denounced Democrats for reneging on a pledge during markup that no tax increases would be used to finance the farm bill. House Agriculture Committee Chair Collin Peterson (D-MN) and House Speaker Nancy Pelosi (D-CA) said the move was not a tax increase, but closed a loophole in the tax code. The oil and gas action was to force the payment of 1998-1999 royalties by energy companies on federal drilling leases.

This “perfect storm” of legislation is the product of several factors that have never converged before, at least in my memory. First, the House must operate on a “pay-go” basis, meaning it cannot spend money on new programs unless it cuts outlays for existing programs. This is part of the politically popular and economically desirable goal of reducing the deficit, and while the Senate is not hamstrung on spending, it, too, will try to control outlays. And they’re rewriting a 2002 farm bill that was created during a time of balanced budgets and surplus treasury dollars.

Second, we have the most inexperienced ag committees in memory, with fully two-thirds of the members and staff of the House Committee on Agriculture having never experienced the gestation and birth of omnibus farm legislation. And while the Senate panel has a wealth of farm bill veterans, the overall Senate is green as well.

Third, we have a Democrat-controlled Congress, which, while trying to court rural America going into the 2008 presidential and congressional elections, still wants to find a way to be the savior of the treasury, and from its ranks come loud calls for farm program “reform,” meaning cuts to traditional check-writing programs to pay for conservation, nutrition, energy, and specialty crop/organic/natural production and promotion. And last, but certainly not least, only a few of the mainstream commodity groups have embraced the reality that it’s no longer 1949, and they have to get creative in their approach to farm program payments. That “reform” thing is getting thrown around quite liberally.

Peterson got off to a very rocky start as lead dog on his committee, opting for a traditional bottom-up approach to drafting the legislation, meaning he allowed the various subcommittees to draft and approve the titles or sections of the farm bill, the goal being a happy, seamless marriage in full committee.

On the energy title, it was pretty apparent to all that Peterson’s committee has little formal jurisdiction over what can be done to reduce this country’s dependence on foreign oil. But the subcommittee, at his behest, cobbled together a pretty straightforward and seemingly progressive set of priorities on alternative feedstocks to corn for ethanol, expansion of farm-based biomass energy development, and a pretty aggressive combination with the research title to do the science necessary to ensure these programs have substance. However, when you unwrap this package, you’re pretty much left with current law and programs, just beefed up, but heading in the right direction. Peterson got a “pass” on this one overall because the House is building its own omnibus energy bill to be conferenced with the already approved Senate bill. And while there’s no end of dissension over how best to make America energy independent, the heavy lifting on energy gets done by other committees.

Most subcommittee action went well, until the subcommittee on general commodities sandbagged the chairman by approving its title on crop programs and simply extended the existing system of direct payments, loans, countercyclical payments, and so on. Peterson had asked for a rewrite of these programs to save money to pay for other initiatives, like energy, and counter accusations he was “reform” phobic. There was even word that Pelosi, while promising not to meddle in the farm bill, reached down and “influenced” Peterson to tinker with a couple of programs near and dear to her supporters’ hearts.

Peterson regrouped, sought advice from veterans, and worked like a fiend to come up with a compromise bill to meet the definitions of “reform,” agree with the political needs of his party’s leadership, including increased spending on nutrition, conservation, specialty crop, and energy programs, and be defendable on the floor of the House where several of his colleagues were gunning for him.

The real challenge, however, is how to pay for the new farm bill. Going into final committee markup of the bill, the only offsets Peterson had been guaranteed by leadership were those that would pay for the increased spending on alternative energy programs. At the final showdown, Peterson strung together a series of so-called “payment limitations” to get his bill approved in committee. His compromise: No government checks if your annual adjusted gross income (AGI) is $1 million or more, and no checks if you make $500,000 or more and you can’t prove at least 67 percent of your income comes directly from farming. This approach is supposed to take out the big boys and the celebrity tax shelter crowd. Funny, but Peterson used to talk about limiting payments to anyone over $500,000 AGI, and the White House still wants to see that number pared to $200,000 AGI. In my next column I’ll explain how the House Agriculture Committee chairman found the shekels to buy his new program initiatives.

On the other side of the Hill, Senator Tom Harkin (D-IA) is doing the smart thing, and that is watching and waiting. For Harkin, Peterson’s effort is the dress rehearsal for the Senate’s opening night on farm bill. The word is while staff continues to draft and redraft, Harkin doesn’t plan to bring his bill to full committee until sometime in September, after having watched the House to see which programs fly and which crash and burn. He’ll see what kind of criticism comes from environmental and consumer groups – an ever-more influential alliance on farm policy – and he’ll see what his own farmers and ranchers think of how his House colleagues answered their needs. Harkin is also a formidable player in national Democrat politics, so his colleagues running for the White House will no doubt be looking to him for a farm program platform plank that will sell in the hinterlands and the cities.

Harkin’s energy title is likely to look like the House version, namely, muscled-up existing law and programs with a number of conforming programs taken from the Senate’s energy bill. His bill will be far more conservation/nutrition/specialty crop-oriented than his House colleague’s, but he and his fellow Iowan, Senator Charles Grassley (R-IA), want payment limits on farm programs, so the House $1 million limit is likely going to drop closer to $500,000 AGI.

The truth of the matter is, the chamber’s respective farm bills are really only the buildup to the final act of this drama. They put all the options on the table for the inevitable conference rewrite of the omnibus farm program package. And the optimists continue to believe we’ll finish the farm bill this year. I am not among them, but then I would have bet real money Peterson couldn’t get his farm bill out of committee and to the floor before September.

While it makes everything worse to be voting on a farm program rewrite in an election year, we’ve been there before. The House may have finished its farm bill, but if Harkin doesn’t finish his until September and the goal of both chamber leaders is to recess in mid-October, then time is against a 2007 farm bill. Conference action on farm bill usually takes as long as or longer than it took to get the respective bills to the table in the first place. If staff begins conferencing in October, they could finish by Christmas or shortly thereafter. So, the earliest I see a final vote on the farm bill coming is January 2008. Happy New Year!

View from Washington – August 2007 RENDER | back