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Politico...
Farm subsidies test
GOP pledge
By: David Rogers
January 24, 2011
Rep. Jim Jordan's Ohio district ranks among the top 50 recipients of
farm subsidies
As eager as they are for a fight with the White House, Republican
budget cutters have a problem in their own back pasture: what to do
about a system of farm subsidies that’s still pumping billions into GOP
districts at a time of record income for producers.
Net cash farm income for 2010 is projected to finish near $92.5 billion
— a 41 percent increase even after subtracting payments from the
government. Yet conservatives are almost tongue-tied, as seen last week
with the Republican Study Committee’s proposal to eliminate relatively
modest subsidies for an organic food growers program without mentioning
the nearly $5 billion in much larger government direct payments to farm
country — including to the home districts of many of the RSC’s members.
Indeed, 24 of the RSC’s estimated 165 members hail from the House
Agriculture Committee, and total annual direct payments to their
districts run more than $1.09 billion a year, according to a POLITICO
review of data compiled by the Environmental Working Group. RSC
Chairman Rep. Jim Jordan doesn’t sit on the Agriculture panel but
represents an Ohio district that ranks among the top 50 recipients of
farm subsidies, including $30 million in annual direct payments.
Rep. Jeff Flake (R-Ariz.), a longtime activist in the RSC’s ranks, told
POLITICO that farm subsidies remain “low-hanging fruit” for future
budget cuts, and it’s wrong to read too much into conservative silence.
But after winning back swing farm seats last November, the costly
payments are clearly a sensitive subject for the GOP, even as the party
demands deep cuts elsewhere in domestic spending.
The opening shot is Tuesday’s House vote on a resolution reaffirming
the Republicans’ promise to cut $100 billion by rolling back domestic
appropriations to the 2008 levels under former President George W.
Bush. And the RSC is pressing Speaker John Boehner (R-Ohio) to both
keep this promise and agree to a second round of cuts to bring spending
down to the 2006 levels set by the last Republican-controlled Congress.
A 78-page bill to that effect was filed Monday with 25 sponsors. And in
a letter to Boehner signed by 89 Republicans, RSC leaders urged that he
hold firm.
“Under your leadership during the campaign, House Republicans boldly
pledged to cut federal spending by $100 billion by returning current
spending back to FY2008 levels,” the letter reads. “Despite the added
challenge of being four months into the current fiscal year, we still
must keep our $100 billion pledge to the American people.”
Tuesday’s debate will take place just hours before President Barack
Obama’s State of the Union address in the same chamber. And the
implicit goal is to trap the president in a vise, so to speak, squeezed
between Republican demands and what are sure to be a grim set of
updated deficit estimates from the Congressional Budget Office
Wednesday.
“It’s politics, pure and simple,” said Rep. Jim McGovern (D-Mass.).
“This is show business.”
But as seen with the farm subsidy issue, the politics may be
double-edged for the GOP.
Fully in control, the leadership easily prevailed Monday on an early
procedural test. The 240-160 vote fell along party lines with just
eight Democrats feeling enough pressure to fall in line with the GOP on
the spending issue.
Looking down the road toward the real fight in early March, the impact
of the proposed spending cuts will be more real, and Majority Leader
Eric Cantor (R-Va.) has promised an open process by which alternative
budget proposals will be debated.
“RSC, progressives, they will all have the opportunity to present their
view of how we should cut spending,” Cantor told reporters. “We’ve not
announced exactly when that will take place. Stay tuned. But I will say
again, this is going to be an open process.”
Most attention will be on discretionary appropriations, which fund the
daily operations of the government. But Republicans have already opened
the door to cutting Medicaid funding for the states or so-called
mandatory funds authorized under Obama’s health care reforms. And given
the size of the payments to farmers, even a 20 percent reduction could
yield as much as $1 billion in annual savings.
The direct payments program itself is rooted in the early years of the
so-called Republican Revolution of the mid-’90s and the famous Freedom
to Farm Act, which promised to wean producers off federal support. The
payments were billed as a temporary measure but have stubbornly
endured, paid out under a formula driven by past production levels and
not what prices or costs are for farmers today.
The result is really an “income enhancement” payment for producers and
one that stands out even more now that farm income has risen
dramatically. While 2009 and the global recession saw much lower farm
income than today, there is significant evidence of a more permanent
change in U.S. and world commodity markets from when the direct
payments were first conceived.
Keith Collins, former chief economist for the Agriculture Department
and now a private adviser to the crop insurance industry, said that two
trends are chiefly responsible. First, new middle-classes are emerging
in developing countries like India and China that are able to pay more
for food and second, closer to home, is the growth in the heavily
subsidized production of ethanol and other biofuels.
Thus the projected farm income for 2010 is not only a rebound from 2009
but also significantly higher than the historic 10-year average. And
the president’s deficit reduction commission recommended a net decrease
of about $10 billion over 10 years in subsidies.
With a new farm bill in the offing, there is sure to be resistance to
any dramatic changes this year. And it can be argued that Agriculture
already took a $6 billion hit last July in renegotiating the Standard
Reinsurance Agreement that governs crop insurance. One-third of those
savings, or about $2 billion, was to be invested in improvements to the
Conservation Reserve Program, but farm interests will argue that they
are already out front in deficit reduction.
Politico
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