Where will the new Tea‐Party‐backed members of Congress come down on trade issues, such as the newly revised trade agreement with South Korea or the next farm bill?
Those elected to the House are the biggest question marks because very few of them have had to think much about trade, never mind actually cast a vote on it. In an op‐ed in the Philadelphia Inquirer this week, I try to discern what direction the new members will take the generally pro‐trade Republican Party, and which direction they should take it in light of the movement’s free‐market, limited‐government principles.
For my full take, see “Are Tea Partiers Anti‐trade?”
My colleagues have done a thorough job of analyzing the policy implications of Tuesday’s federal election outcome as it affects trade policy, health care, immigration, education, and the scope and size of government generally (more here on federal spending). Most of them are cautiously optimistic that a Republican‐controlled House is good news for liberty‐minded folk. Let’s hope so.
Unfortunately, there are fewer obvious reasons for optimism that Tuesday’s result will mean big changes in agricultural policy, a depressingly bipartisan area of federal intervention. Even Rand Paul, the poster child for the Tea Party, expressed “moderate” views on farm subsidies during his campaign.
On the positive side of the ledger, our friends at the Environmental Working Group make the excellent point that being a friend of Big Farming was not enough to shield many Democrats from defeat. Earl Pomeroy (D, ND) represents the congressional district that ranks Number One in farm subsidy receipts (now there’s a source of pride!) and even he got the boot. As did Senator Blanche Lincoln, chairperson of the Senate Agriculture Committee and shameless architect of a bailout package for farmers that was funded we‐don’t‐exactly‐know‐how. At least 15 (possibly 16 if Rep. Jim Costa (D., CA) loses his too‐close‐to‐call race) Dem members of the House Agriculture Committee — friends of the farmer all — are now looking for work. In other words, support for Big Ag is not a sufficient shield.
On the other hand, it’s not clear that their replacements are an improvement as far as agriculture policy is concerned. With a new farm bill due to be written in 2012 (although soon‐to‐be‐former House Agriculture Committee chairman Collin Peterson (D., MN) was trying to get that ball rolling earlier), it is not certain that the fiscal conservatism exhibited during most Republicans’ campaigns extends to farm policy. Indeed, probable new House Agriculture Committee chairman Frank Lucas (R., OK) has said he disagrees with getting rid of the fiscally offensive (but less trade‐distorting) direct payments that flow to farmers regardless of what, or even whether, they farm. That was an area of reform that Collin Peterson was at least willing to look at. (More on the implications for direct payments here).
Chuck Abbott, agriculture reporter for Reuters, has more analysis on the outlook for farm policy. His is a more optimistic take, and I hope he’s correct. For my part, my skepticism is based on statements such as those by the CEO of the Renewable Fuels Association, speaking on a conference call yesterday:
[F]or the most part those that may have been defeated were replaced with equally strong advocates for value added agriculture and ethanol. Does anyone believe that Kristy Noem (R‑SD) will not be a strong voice for ethanol?
Exactly. The fight’s not over yet, folks.
The president’s fiscal reform commission started off with some breathtaking chutzpah from Senate Budget Committee Chairman Kent Conrad (D‑ND):
Rising federal debt is like a tsunami that could swamp the country at any moment…Our economic strength and security is on the line. Now is the time to act. And we need everyone, Democrats and Republicans, working together on a solution.
I personally believe that saying, ‘everything is on the table’ is critical. I hope none of us will take things off the table prematurely, because I think it is clear it’s going to take dramatic changes on the spending side of the ledger, and it’s going to take changes on the revenue side of the ledger.
Does Sen. Conrad consider farm subsidies to be on the table? In February, the Wall Street Journal exposed Conrad as a hypocritical big spender. For example, Conrad doesn’t miss an opportunity to shower his farm constituents with federal largesse:
He has been a defender of the state’s grain farmers ever since [his election to the Senate in 1986]. He voted last April against a proposal to cap federal payments to the nation’s farmers at $250,000 per farmer per year, a measure that Mr. Conrad criticized as disastrous but that supporters said would have saved $1 billion a year.
He also helped draft a five‐year, $300 billion farm bill in 2008 that boosted overall farm subsidies. The bill created a $3.8 billion emergency “trust fund” for farmers who lose crops or livestock to natural disasters, which was Mr. Conrad’s idea. Since 2008, North Dakota ranchers have received $23 million under the fund, second only to Texas.
What about federal entitlement programs, which represent the biggest budgetary threat going forward?
In 2003, Mr. Conrad joined most Democratic senators to support Mr. Bush’s plan to provide Medicare prescription‐drug coverage to seniors, at a cost of around $40 billion a year. The plan required Congress to scrap the spending controls Mr. Conrad once championed. Republicans won the votes of Mr. Conrad and other rural senators by agreeing to expand the program by pumping $25 billion more into rural hospitals and doctors over 10 years.
Flanked by the co‐chairmen of the new commission, Obama challenged the two parties to join in taking a “hard look” at the growing gap between what the government spends and raises in revenue, and to “think more about the next generation than the next election.”
The “growing gap” the president cites is one of his own doing. The following chart shows the projected gap between spending and revenues according to the Congressional Budget Office’s analysis of the president’s latest budget proposal:
The chart shows that revenues are already set to consume a larger share of the economy. The problem is that spending is on an elevator going up.
The politicians with the most power in Washington are precisely the ones pretending that they are powerless to steer the nation away from a looming fiscal disaster. Their claims are total, utter, complete nonsense. Both Obama and Conrad could have proposed budgets this year that actually cut spending to reduce the deficit. Both chose not to. They are the ones fueling the “tsunami.” They are the ones who don’t have the guts to cut off this generation’s subsidy recipients for the sake of the next generation. It’s that simple.
I’ve written before about Rep. Collin Peterson’s (D, MN) disdain for the World Trade Organization, and its rulings against U.S. farm programs. However, in launching his 2012 Farm Bill listening tour, the Brownfield blog reports that he sees that perhaps some changes might be necessary after all. And, lo and behold, he cites the WTO rulings as the reason:
One of the key issues [in the 2012 Farm Bill] will be what to do about the way that cotton farmers are subsidized. The committee’s chairman, Rep. Collin Peterson, D‑Minn., said today that the cotton program will have to be overhauled in the wake of Brazil’s successful challenge to the subsidies at the World Trade Organization. The Obama administration agreed to change the program in a deal to avert retaliation against U.S. exports to Brazil. [link added]
Subsidies for cotton currently mirror those for corn, soybeans, wheat and other commodities, but there’s no reason why they have to be the same for each crop in the future, said Peterson. “In the past we’ve tried to have a one‐size‐fits‐all approach, but maybe that’s not the case in the future. I’m willing to consider that,” he said. “If we don’t address it, we may be back in the soup again with potential retaliation issues.” [emphasis mine]
Finally, the penny drops.
It’s become standard fare for senior government leaders to declare that any and all subsidies are good for economic growth. Two weeks ago it was the Economic Development Administration’s John Fernandez. This week it’s USDA Secretary Tom Vilsack in a speech to the U.S. Conference of Mayors.
In his speech, Vilsack called the increase in supplemental nutrition assistance program benefits “an economic driver” that helps truckers, grocery stores and farmers. Those benefits, which used to be known as food stamps, have gotten the most funding of any USDA program.
Vilsack also cited increased funding to bring high‐speed Internet service to rural America; accelerated implementation of the energy title of the farm bill; and USDA investments in small, local processing and slaughtering plants for “creating a framework for a 21st century America.
Food stamps are an economic driver? Extending Vilsack’s logic, if the government put all citizens on food stamps it would create the economic equivalent of heaven on earth. There’s just one tiny problem: what the government gives with one hand it takes with the other.
Whether it is food stamps, high‐speed internet, or slaughter houses, the government has to tax or borrow the resources to pay for these programs out of the private sector economy. One can debate the merits of these programs, but one cannot deny that they come at a cost. And with history and practical experience as a guide, it is clear that the private sector is more effective than the government when it comes to feeding the poor, fostering technology, and processing animals.
See here for information and essays on how to downsize the USDA.
House Agriculture Committee Chairman Colin Peterson (D, Sugarbeet Farmers) announced yesterday [$] that he would begin hearings on the 2012 Farm Bill this spring. I’m still recovering from the traumatizing 2008 Farm Bill fight, so I heard this news with some trepidation.
But wait! Put those red pens away, folks, because Chairman Peterson plans to keep on spending on agricultural programs. Heaven forbid that agriculture should take any of those “cuts” we’ve been hearing so much about :
House Agriculture Committee Chairman Collin Peterson, D‑Minn., said… he is determined to write a bipartisan bill that is within the funding baseline that exists in 2012.
The funding baseline is the amount of money that the Congressional Budget Office determines would be spent on all programs in the farm bill if the same programs were to continue after 2012. CBO projects the funding levels based on spending in programs in past years.
Peterson said at least initially he expects each major farm bill section — the farm program, conservation and nutrition — to stay within its 2012 baseline.
He also specifically pledged to fight off any attempts to lower direct payments, which flow to current or past farmers of certain crops year‐in‐year‐out, regardless of whether they still farm or not.
Some further details on his plans for the next farm bill can be found in this National Journal article [$ again, sorry] but the gist of it is that Chairman Peterson doesn’t want reformers interfering the way they did last time, even if farmers were left practically unscathed from the battle.
In a speech to the National Association of Wheat Growers and U.S. Wheat Associates, Peterson said that reformers “who don’t understand how this works … defined what reform is” in 2008. Peterson said there should be changes to the farm bill, but he ridiculed one of the reformers’ biggest goals: limitations on payments to big farmers.
The campaign to lower payment limits “is not reform. It’s an ideology,” he said. Reformers want Congress to decide what size farms should get subsidies, a notion that Peterson rejects. “We are not smart enough in government to decide what farm size is,” he said.
(Sidebar: Isn’t it cute how Chairman Peterson couches his opposition to farm payment limits in libertarianish terms about how government “isn’t smart enough.” His support for a 80+-year-old suite of government interventions suggests he is not as skeptical about government’s smarts as he indicates in this little political aside. But I digress.)
And in a charming dismissal of the importance of free trade (he’s an old‐hand at dismissing international obligations in this area), Chairman Peterson offered this:
Peterson said he did not think pressures to comply with trade agreements would be too much of a problem in the farm bill because “the trade situation is dead in the water,” and negotiators realize they cannot get approval from Congress if agriculture is not satisfied. “We’ve got some power over that system,” he said.
“I am not going to turn myself into a pretzel to accommodate this latest trade agreement,” he said.
A disappointing start to the 2012 Farm Bill fight, to be sure, but my hope is not dashed. With any luck, the recent signs of voters’ disgust with Washington will translate into some extra political support for those of us working for real reform. (see examples here and here.)