The 'supercommittee': Shortcut to farm policy changes?

by Robbin S. Johnson
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Much of this fall’s economic news has concerned the European Union’s efforts to cope with large national budget deficits in Greece, Spain, Italy and Ireland. Though Europe’s struggles with deficits are far from over, attention is now shifting to America’s own attempt at deficit reduction. Though agriculture represents a small part of federal spending, there are some good reasons to pay attention to the actions of the deficit-reduction “supercommittee.” They may prove to be a shortcut to far-reaching changes in U.S. farm programs.

The formal name of the supercommittee is the Joint Select Committee on Deficit Reduction. It is composed of 12 members of Congress, six Democrats and six Republicans. Party leaders in both houses appointed their members in mid-August, and the supercommittee has been meeting regularly since then.

The process developed for addressing budget-deficit issues is itself the product of political maneuvering. The supercommittee must bring forward its recommendations for cutting the budget deficit by at least $1.2 trillion over the next decade by Nov. 23, just ahead of Thanksgiving. Congress then has one month, until Dec. 23, to vote the recommendation up or down.

If either the supercommittee fails to agree on a plan by its deadline or if Congress fails to approve it by its deadline, the law establishing this process triggers $1.5 trillion in spending cuts over the next 10 years, beginning in 2013 (i.e., safely beyond the next presidential election). Those cuts are to be divided evenly between domestic and defense spending.

The thought behind this process was that the threat of such a “meat axe” approach to both political parties’ spending priorities would be an adequate incentive to break the gridlock that has tied up Washington in recent years. Still, a successful compromise requires one or some group of supercommittee members to break with the spending and taxing dogmas of their party.

Prospects of compromise

There are plenty of skeptics about the likelihood of a compromise. The Republicans and Democrats have been far apart and deeply entrenched in their respective views on how to address deficit reduction. Those differences have been magnified by the difficulties facing the U.S. economy and by the emergence of Tea Party and Occupy Wall Street advocates. Each party’s representatives on the supercommittee seem to reflect their leadership’s views that have brought about the budget impasse.

Moreover, past efforts by the “Gang of Six” and the Bowles-Simpson commission to find common ground on this issue have failed. In fact, three supercommittee members were on the earlier commission and voted against the compromise proposal put forward by Alan Simpson and Erskine Bowles.

As this article is being written, the gap between the two parties remains large. The Democrats have offered a plan to cut $3.2 trillion from the deficit over the next 10 years. That reduction is made up of just under $2 trillion in spending cuts, including $475 billion from Medicare and Medicaid and $400 billion in discretionary spending. Along with these cuts would come $1.3 trillion in new revenues.

The Republicans remain opposed to tax increases. Their plan would cut $2.2 trillion in spending. It contains $40 billion in new revenues but largely through closing loopholes. Tax rates would be reduced. Included in the mix are aspects of the Bush tax cuts, which otherwise expire on Dec. 31, 2012.

Shortcut to farm policy change?

Congress’ standing committees responsible for policy have been

tasked with bringing policy recommendations to the super-committee on how to achieve savings from the programs under their jurisdiction. The House and Senate Agriculture committees may be among the few policy committees to offer ideas with bipartisan support.

Both panels, for example, seem prepared to recommend cutting so-called “direct payments” that go to farmers regardless of what they produce or current price levels. Some see a certain irony in this proposal, since, when those payments initially were enacted in the 1996 farm act, they were called “market transition assistance” and were expected to phase down and out. That is, they were seen as a bridge to a more market-oriented farm policy.

Congress deviated from that plan shortly after the payments went into place, doubling their size in the process. The 2002 farm act, rushed into passage a year ahead of time to take advantage of budget surpluses soon expected to go away, made these payments a permanent feature of farm programs. The perceived irony is that the Agriculture committees now are seeking credit for eliminating payments that initially were intended to go away anyway. Colin Peterson, minority member of the House Agriculture committee, claims that eliminating these payments represents a $15 billion reduction in farm spending.

At the same time, both Agriculture committees appear to be proposing a shift to a “revenue assurance” approach to farm income protection. Under it, farmers would receive a guaranteed minimum of recent revenue or price levels. This new policy comes on the heels of record high grain and oilseed prices, gross revenues and net farm incomes.

Such a policy shift could lock in high farm income protections without any public hearings, debate or cost estimates. It is an open and serious question to ask whether the deficit-reduction process should be used to make such a sweeping policy change. Does this process lead either to better policy or real deficit reduction? It will be interesting to see what results.

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