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Moving toward less ag spending
Thursday the Senate voted to kill ethanol’s tax credit but refused, by a vote of 41 to 59, to pass an amendment from Senator John McCain (R-AZ) that would prevent the USDA from spending funds on blender pumps for ethanol.
The House of Representatives, however, took the opposite approach to blender pumps in its $125.5 billion agriculture appropriations bill that was also passed Thursday.
Neither the ag appropriations bill nor the Senate’s Public Works and Development Act, which includes the anti-ethanol measure, are law yet. Thursday The White House and Agriculture Secretary Tom Vilsack repeated their opposition to ending the ethanol tax credit immediately.
Yet, these events hint at much less money being available for programs for crop farmers when the 2012 Farm Bill is written. And even deeper cuts could be coming out of the closed-door negotiations on deficit cutting being led by Vice President Joe Biden.
“We need reforms and a smarter biofuels program, but simply cutting off support for the industry isn’t the right approach,” Vilsack said in a statement after the vote. “Therefore, we oppose a straight repeal of the Volumetric Ethanol Excise Tax Credit (VEETC) and efforts to block biofuels infrastructure programs.”
Jeff Broin, the CEO of POET, the nation’s largest ethanol producer, found a positive way to view today’s events. “By voting to repeal the ethanol tax credit, while preserving USDA’s funding for flex pumps, the Senate came close to a reform package supported by the ethanol industry,” Broin said. “With enough flex pumps to give consumers true choice at the pump, ethanol can compete directly with gasoline. But while the USDA program is a good first step, it doesn’t go far enough.”
Broin and other ethanol backers support a bill offered by Senators John Thune (R-SD) and Amy Klobuchar (D-MN) that would cut the deficit by $1 billion and abandon the blenders credit, unless oil prices fall. Savings from that bill would pay for spending even more on blender pumps and financing an ethanol pipeline.
But what the Senate did Thursday simply eliminates the entire ethanol tax credit of 45 cents a gallon, cutting $3 billion from the deficit and leaving nothing for an expanded program to build infrastructure.
Chris Thorne, a spokesman for the ethanol lobbying group, Growth Energy, told Agriculture.com that the Thune-Klobuchar bill still has a chance, since it has been introduced as separate legislation, not an amendment to another bill.
But the ethanol interests have a lot of selling to do to get that passed before the credit expires on December 31.
They’re not likely to convince the Environmental Working Group.
"The Senate has put American taxpayers and our soil and water ahead of special interests and the corn ethanol lobby," said Sheila Karpf, a legislative and policy analyst at the lobbying group.
In theory, making things tougher for the ethanol industry might lower incentives to plant corn, but those corn farmers who want to participate in conservation programs will find a lot less help if the House ag appropriations bill survives negotiations with the Senate on a final spending bill.
Conservation programs were a big loser in Thursday’s vote in the House, according to Ferd Hoefner, a lobbyist with the National Sustainable Agriculture Coalition.
Hoefner said the bill cuts another $1 billion from spending on conservation programs, after cutting about $500 million in the appropriations bill for this year.
The biggest cuts were $350 million to EQIP (the environmental quality incentives program), perhaps $210 million to CSP (the conservation stewardship program)—although Hoefner thinks there will be a one-year lag for those savings, and $200 million to the Wetlands Reserve Program.
It’s part of some $7 billion in spending reductions from the amount requested by President Barack Obama for the 2012 fiscal year that starts in October. And the House Appropriations Committeee Chairman, Hal Rogers, considers the $125.5 billion left to be adequate for USDA and the Food and Drug Administration.
“This bill answers the call from Americans to reduce government spending while still providing for critical programs that keep American agriculture competitive in a global economy. The funding in this bill will help our rural communities to thrive, provide daily nutrition to children and families across the country, and keep our food and drug supply safe,” Rogers said in a statement.
Hoefner, too, says that conservation programs will have substantial funds, including $1.4 billion for EQIP next year.
“There’s still a fair amount of money in the till, but the waiting lists for these programs, they’re running two to three years and it probably ultimately scares many farmers away,” he told Agriculture.com.
The bigger issue, he added, is that each time the House cuts spending on agriculture programs, it’s lowering the amount of money that the House Agriculture Committee will have for commodity programs as well as nutrition programs when it writes the 2012 Farm Bill.
House Agriculture Committee Chairman Frank Lucas (R-OK) managed to convince his colleagues to vote against some amendments that Lucas says should be left to his committee when it decides on farm policy next year.
One, offered by Representative Earl Blumenauer (D-OR), would have capped commodity program payments at $125,000. That was defeated.
Hoefner said he doesn’t envy Lucas’s task of working with a spending baseline that continues to shrink.
“They have to do a better job of defending their turf,” he said, “and their turf is conservation, nutrition, energy and commodities.”
The ranking Democrat on the House Agriculture Committee, Representative Collin Peterson, seems to agree.
“Agriculture is under assault in this Congress,” Peterson said in a statement released after the vote. “We first saw it with the Ryan budget, which cut $178 billion from agriculture programs. And today, Congress approved a bill that makes disproportionate cuts to agriculture, including vital conservation and nutrition programs. Additionally, the bill includes an unprecedented nearly $2 billion in changes to mandatory spending, taking funds from carefully negotiated farm bill programs.”
House Budget Committee Chairman Paul Ryan included some $30 billion in cuts to commodity programs over 10 years (or $3 billion a year), mainly by trimming direct payments and subsidies for crop insurance premiums.
Ultimately, both the Republican-controlled House and the Democratic Party-controlled Senate will have to abide by the spending limits now being negotiated by congressional leaders and Vice President Joe Biden.
Hoefner said that he believes the group has already targeted cuts to commodity programs that are even bigger than Ryan’s, at a level of about $34 billion over 10 years. That’s based on $50 billion in savings from eliminating Direct Payments, which cost the government about $5 billion a year. The Office of Management and Budget is projecting 10-year costs of $16 billion for continuing ACRE (Average Crop Revenue Election). Subtracting that amount from $50 billion leaves an estimated $34 billion for deficit reduction.
Lucas didn’t succeed in getting the House to avoid all farm policy issues, however. The list of last-minute amendments ran the gamut, from preventing the USDA from spending more money on its “Know your farmer, know your food” initiative, to stopping the FDA from approving genetically engineered salmon.
And Ag Committee member Steve King (R-IA) got his colleagues to approve (240-176) barring funding for telemedicine services related to the abortion pill known as RU-488.
One of the bigger losses for Lucas was an amendment offered by Representative Ron Kind (D-WI) to stop payments of $147 million to the Brazilian Cotton Institute.
In a letter to his colleagues, Chairman Lucas argued against the Kind amendment.
“The simple truth is that passing this amendment would put us in violation of an international trade agreement,” Lucas wrote. “In 2010, the U.S. and Brazil completed a Framework Agreement that is a critical step in resolving a trade dispute with Brazil. Under this agreement, Brazil agreed to suspend trade retaliation through the development of the 2012 Farm Bill. The current arrangement is not ideal, nor is it permanent. It is, however, the only thing standing between us and a trade war with our tenth largest trading partner. “
Lucas said that violating the agreement will mean that Brazil will immediately begin to impose retaliatory sanctions on $800 million worth of U.S. goods. These sanctions will not be just on agricultural products; they will include software, books, music, and films.
Most of the agricultural spending bill goes to nutrition programs for the poor, and cuts to those programs angered urban Democrats, including Agriculture Committee member James McGovern of Massachusetts.
The ag appropriations bill usually gets little attention, McGovern said. “There’s not a lot of lobbyists down here for poor people.”
The House bill also stops USDA from implementing changes to the Packers and Stockyards Act commonly known as the GIPSA rule, after the agency enforcing it, the Grain Inspections Packers and Stockyards Administration.
According to the Dow Jones Newswire, the National Pork Producers Council praised the bill, saying it prevents the USDA from implementing an overhaul to rules that govern how livestock is sold to the packing industry.
USDA officials have argued that the proposed rules would put an end to practices that allow for price manipulation that harms the producer, but a growing number of lawmakers and groups like the National Pork Producers Council, the American Meat Institute and the National Meat Association argue that they would stifle livestock commerce by over-regulating transactions between farmers that raise livestock and the packers that buy them.