It what some characterize as a triumph (and others as a sad indictment on the state of U.S. parliamentary politics), the U.S. House of Representatives failed to pass the farm bill yesterday (roll call here, 62 Republicans and 172 Democrats voting “no”). According to Charles Abbott of Reuters, it was the first time in 40 years (or possibly in history) that the House has failed to pass a farm bill.

It seems that many GOPers voted against it because the food stamp cuts were not big enough, and most Dems who voted no did so because the food stamp cuts were too big. Good luck trying to square that circle.

The Hill and Politico have more on the political fallout, none of which I particularly care about. Whoever is to “blame” (personally, I’d like to bestow Presidential Medals of Freedom on the culprits), it is clear that the old urban-rural alliance, and the idea that you can build coalitions by loading a bill with “something for everyone,” is fraying.

For too long, American taxpayers and consumers have been burdened by the scourge of special interest politics that sees farm bills passed more-or-less intact time after time. And the reason, quite frankly, is that things could be even worse if the farm bills fail to pass. One of the ag lobby’s best friends in Congress, Rep. Collin Petersen (D-MN), exposed the extortion threat behind this quinquennial circus in part of his remarks Wednesday:

Mr. PETERSON….When I was chairman and did the last farm bill, we maintained the permanent law, and we did it for a reason, which is that it is very hard to get these farm bills done, and sometimes you need some motivation to get people to move. That’s the main reason we left it there. [From the Congressional Record, pH3860. HT: Scott Lincicome, emphasis added]

That’s the key to ending the role of the federal government in agriculture once and for all: getting that “permanent” 1949 law off the books. It would be a hard legislative slog, for sure. A narrower (but still worthy) amendment by Rep. Paul Broun (R-GA), striking only the dairy price support part of the 1949 Act, failed 309-112. (On the other hand, an amendment stripping out the supply management aspect of the proposed new dairy policy passed 291-135.) But so long as this law is part of the national legislative fabric, we’ll have a dairy cliff (or some other commodity-themed cliff) every five years.

Where to go from here? Maybe the House will pass another extention of the current farm bill (itself an extension of the 2008 farm bill, which was supposed to expire in 2012), trying to buy time. Or maybe they will try to cut food stamps even more in an attempt to pass the bill with Republican support more or less alone (though that would presumably be vetoed by President Obama). Or, possibly, the House will not pass a bill at all and go straight to conference with the Senate. (The Washington Post’s Brad Plumer goes into more detail on that possibility.) I don’t know. What I do know is that Congress will more or less be tinkering at the edges unless and until that permanent law is repealed once and for all.

The Congressional Budget Office has fiscally scored the Senate’s immigration bill, S. 744, and found that it will decrease fiscal deficits over the next 20 years—giving a huge boost to reform proponents.  In line with criticisms made by me and others, the CBO departed from orthodoxy and assumed that S. 744 would affect economic growth (i.e., they dynamically scored the bill)—arguing that the economic and fiscal gains from immigration reform are clear.  These findings are broadly consistent with Cato’s findings here.  

The CBO produced two scores of S. 744.  The first was less dynamic, assuming that GDP and the workforce would grow as a result of immigration. Increased numbers of workers will add to GDP, producing growth by definition, and not displacing many other workers.  The second score is more dynamic, taking into account many of the economic effects of immigration reform using an enhanced Solow model.

The less-dynamic CBO score found that immigration reform will reduce the federal deficit by about $197 billion by increased GDP and tax revenues through adding six million people to the workforce by 2023.  Over a period of 20 years, the CBO estimated that this legislation would reduce deficits by about $700 billion—a sizeable decrease.  In what seems to be a specific dig at the 50-year span of the recent Heritage study, the CBO wrote that, “we cannot determine whether enactment of S. 744 would lead to an increase in on-budget deficits … in any of the three 10-year periods starting in 2033.” 

The more dynamic CBO score found that S. 744 would not affect the budget by 2023.  However, because the dynamic economic effects of S. 744 would affect the economy slowly, the CBO predicts a $300 billion decrease in deficits from 2023-2033 greater that the $700 billion reported in the less-dynamic score.

The more-dynamic CBO model predicts $1.197 trillion in reduced deficits over the next 20 years if immigration reform is passed. 

Delving into the details of the CBO’s more-dynamic score, they estimated that S. 744 would increase GDP by 3.3 percent in 2023 and 5.4 percent in 2033, relative to the baseline.  Per capita GNP would lower by .7 percent by 2023 but be higher by .2 percent in 2033.  Wages would be .5 percent higher in 2033 under S. 744. 

The more-dynamic score takes into account these effects from S. 744: 

1. Increased size and employment in the economy.
2. Increased average wages after 2025.
3. Slightly increased unemployment rate through 2020.
4. Increased quantity of capital investment.
5. Increased productivity of labor (due to complementary task specialization).
6. Increased productivity of capital (due to increase in supply of labor and TFP).
7. Higher interest rates.

The CBO took account of some of the main findings in the economic literature about the economic effects of immigration.  For example, the CBO predicts there will be a 12 percent increase in the wages of legalized immigrants.

Conceptually, dynamically scoring legislation is a big step toward rationally judging the costs and benefits of policy changes.  Legislation that changes the size of the economy or the pace of economic growth will affect future tax revenues that will, in turn, affect the fiscal state of the federal government.  CBO scores have been inaccurate over time—many wildly so.  They should never be the final word on the estimated net fiscal costs of immigration reform, but this is the most thorough examination to date. The CBO’s findings broadly confirm Cato’s research that immigration reform will be economically beneficial to immigrants and the country as a whole. 

A number of my Cato colleagues have offered good criticisms of developments related to the latest farm bill here, here, here, here, here, and here. (That’s a lot of “heres,” but farm subsidies deserve a lot of criticism!) But there is one possible element of the farm bill that would actually count as “reform”: a proposal to take some of the protectionism out of food aid.

I discussed this issue here and here. As I noted, the way these programs work is that when giving aid to help with food shortages abroad, ”[i]nstead of simply giving money to people to buy food from the cheapest source, the U.S. government buys food from U.S. producers and requires that it be sent overseas on U.S. ships.” Not surprisingly, that’s not a very efficient way of doing things. As noted in an article in the Guardian newspaper, “50% of the US food aid budget is currently spent on shipping costs.”  

To address this problem, a food aid reform act has been introduced in the House, and would eliminate the requirements that food assistance be grown in the U.S. and transported on U.S.-flagged ships. Currently, this act is a separate bill, but the article says that “many observers assume that it will probably be tied into the House farm bill eventually.” So, while there’s still plenty not to like about the farm bill, a fix to this long-standing example of economic nationalism would be welcome.