Get the Daily Digest

Take a Walk to Protect People, Pets, Livestock, Bears and Panthers

Advocacy

  REGISTER

1-FARM BILL: House panel Farm Bill debate begins Wednesday

Senate, House farm bills follow different paths
By: David Rogers
 

To look behind the numbers for the House and Senate farm bills is to see rival visions of the government's role in agriculture - each playing on the different ambitions and anxieties of farmers themselves.

The centerpiece for the Senate is a new taxpayer-financed "shallow-loss" program that reduces deductibles on crop insurance and can be tailored to each farm's output. This plays to the "Captain of My Ship" side of farming, and for Midwest corn and soybean producers - already riding a wave of high prices - it's a bold, enticing view.

The House draft - to be marked up this week by the Agriculture Committee - bears the imprint of the South, which not only lost Tara but lives in fear of price swings on world markets and having no safety net.

The House knocks the pins out from under the Senate by taking away the individual farm-level option in its shallow-loss plan. This cuts participation by half. And all those bold "captains" revert to their farmer's fatalism - embracing government-set price supports, the House's old-style protection against deep losses if markets again plunge below production costs.

Among individual crops, corn and soybeans fare far worse in the House bill than in the Senate's. Wheat does better on balance, but the biggest winners are Southern crops like rice and peanuts. The $14 per hundredweight reference price for rice is higher than many expected given that growers can also update their yields - an important concession to rice. Subsidies for peanut producers actually go up relative to the Congressional Budget Office's 2012 baseline - while most other commodities go down.

It makes for a starker contrast than anticipated. After all, these same leaders of the House and Senate agriculture committees said they were near a deal back in November. Some of the muscle-flexing may be the usual farm bill posturing. But it's a risky game given the narrow window left: less than three months before the current farm program ends Sept. 30.

Indeed, both bills save billions and begin with the same decision: to scrap the current 1990s-era system of direct cash payments costing about $5 billion a year.

Each then turns around and reinvests roughly the same portion of the savings, though the House's delayed-payment structure works to understate its true costs in comparison with the Senate.

CBO tables show that the Senate's shallow-loss program, dubbed Agriculture Risk Coverage, will cost taxpayers $28.5 billion over the next decade. The comparable assistance in the House bill costs $4 billion less: $8.6 billion for a scaled-back ARC counterpart and nearly $16 billion for the new Price Loss Coverage.

But that $4 billion difference is not what it seems because the House bill makes its payments to farmers at the end of the marketing year, not the crop year. This results in pushing payments into the next fiscal year: In 2014, for example, no payment is shown in the House bill, while the Senate is charged $2.9 billion by CBO. This helps explain the Senate's higher 10-year score.

What's most important is CBO's analysis of how farmers will respond to losing the option of farm-level coverage under the shallow-loss plans.

This was an idea demanded by senators from Great Plains states, where the counties are far larger than in the Midwest. A countywide coverage standard in Montana, for example, was seen as too cumbersome for farmers. But when farm-level coverage became part of the Senate's ARC plan, it had almost a multiplier effect.

Now, with the House canceling that feature, CBO analysts predict the participation rate in the shallow-loss program will drop by more than half. Instead, farmers will enroll in greater numbers in the House's PLC option with price supports - and this has a ripple effect, too, on crop insurance costs.

CBO had assumed that under the Senate bill, ARC - which pays on losses between 79 percent and 89 percent - would substitute for high-end crop insurance now bought by some producers. Most farmers can't afford to buy coverage that high. But some do, and once ARC was offered on an individual farm basis, it became an alternative.

Less crop insurance means fewer premium subsidies - a savings for the taxpayer. In this case, CBO credits the Senate with $2.47 billion in savings - almost four times the $639 million in savings attributed to the House plan.

Moreover, the House designed its PLC program so farmers could easily enroll in a new, lower-cost supplemental coverage option program in both bills. This helps increase SCO's participation rate, and the added subsidies are worth almost $1 billion over 10 years.

Together with other, smaller changes - helping cotton, specialty crops and livestock producers - the House ends up with a much higher tab for crop insurance than the Senate.

The Senate bill, as first introduced, added about $5.1 billion for crop insurance and may have cut this back by at least $1 billion as a result of a floor amendment demanding that producers with income higher than $750,000 pay a greater share of their premiums.

The House scorns this modest reform: "Absolutely not," an indignant staffer said when asked whether it would be included. On balance, the House's crop insurance costs are up $9.5 billion, at least $4 billion to $5 billion above the Senate's.

The key political yardstick is how much is saved altogether between the commodity and crop insurance titles.

CBO credits the Senate bill with about $14.7 billion even before allowing for what could be a further $1 billion in savings from the crop insurance amendment. The House bill would save less - closer to $14 billion. And if the missing 2014 payment is factored into the equation, it can be argued that the Senate bill would save at least several billion dollars more than the House.

Given the size of the two bills, these are not huge cost differences in themselves. But they could become important politically in light of the House's much deeper cuts in food stamps.

The draft bill released last week takes almost $16.5 billion from this anti-poverty program - compared with the $4.5 billion in savings approved by the Senate. And Agriculture Committee Republicans blew up an attempt by Chairman Frank Lucas (R-Okla.) to achieve these savings in a fashion that would allow more working-class families to stay on the rolls.

If the House gets into a vengeful fight over food stamps, an extra $3 billion to $4 billion in subsidies for profitable farms could become a sore point. Urban Democrats, whose support was vital in the 2008 farm bill debate, are already upset. And the pressure will almost certainly mount for tougher payment limits or reduced subsidies for the most wealthy farm operations.

At the same time, the House would argue that its bill restores a certain rough justice in terms of allocating the cuts among commodities.

The CBO has estimated that corn and soybeans accounted for about 21 percent of the reduced commodity payments projected in the Senate bill. But these two crops account for 53 percent of the planted acres in 2012, and if direct cash payments were continued, CBO has projected that corn and soybeans would have gotten about half as well.

The House bill greatly ups the ante to even the scales.

Given the delayed payment structure, it's hard to make a precise comparison with the Senate, but CBO tables suggest corn and soybeans would account for 49 percent of the reduced commodity payments in the House plan - more in tune with their standing today.

Wheat would come down by about 10 points to bear 21 percent of the burden, which is roughly equal to wheat's 22 percent share of direct payments and 17 percent of planted acres, according to the latest survey from the Agriculture Department last month.

But peanut producers would get marginally more - not less - according to the same CBO tables. And rice would absorb only 4 percent of the cut when it was in line to get 8 percent of direct payments

The National Corn Growers Association is already raising concerns that the House target prices will distort planting decisions. And certainly there will be opposition from leading Midwest Republicans on the Senate agriculture committee who took immense pride in keeping any such aid out of their bill.

Wheat is the commodity perhaps most caught in the middle. Rice and peanuts are too small - less than 2 percent of the acres planted today. But by allowing farmers to update their yield-per-acre numbers, the House hopes to build in an incentive for producers to stay with what they have been growing and not jump around based on target prices.

© 2012 POLITICO LLC