A 2-year farm bill extension? Direct payment cuts but no boost to safety nets? Ag economist says it’s possible
October 16, 2013
With the farm bill expiring and the federal government shutting down on the same day last week, agriculture took a hit.
Brad Lubben, an agriculture economist with the University of Nebraska-Lincoln, took time out of schedule to discuss the issues at hand.
Below are portions of that conversation:
1. With both of these things happening at once, it's obviously not good for farmers, ranchers and dairymen. What is your biggest concern right now?
A. Well, the farm bill expired really with a whimper on Monday … not even the biggest headline of day.
The fact that we couldn't even get an appropriations bill together to fund government, to keep it open, certainly took the headlines.
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It's all so indicative of the fighting we've been seeing for more than two years, in the debating of a farm bill, and the same problem that we've grown frustrated with.
The failure of passing a farm bill is just a symptom of a bigger problem — that Washington has really been unable to do anything of much production for quite some time.
The farm bill just happens to be the key piece of legislation that we've kept our eyes on.
Like the budget bill, the appropriations bill and the debt ceiling facing us in a couple weeks, there's little evidence that Congress can get something accomplished.
That doesn't bode well for a lot of things, including when and how we get this farm bill wrapped up.
2. So where do things stand?
A. Now we're essentially in a state of limbo with some programs. Some continue to operate through the end of the production year.
So for commodity programs, we don't see a substantial impact until Jan. 1, when we would face permanent legislation, as it applies to milk, for example. That was the "dairy cliff" we got to talking about toward the end of last December.
Imagine double the price of milk at the case in the grocery store — it was a big enough headline to get the job done.
There's a good chance we carry this right to the end of December again, at which point we really have to choose one side of the road or the other. Either get the new bill done, or revert yet again to another extension of current legislation — either of which is a preferred political alternative to actually implementing permanent legislation from 1949, which would increase milk prices, among others things.
3. And where do we go from here?
A. So we sort of know the road ahead. At some point, by Dec. 31, we have a major fork. Either we do get a new farm bill done, or pass an extension.
But for those watching commodity programs and commodity policy, many fear debate over extension, because I don't think you can get an extension again the same way you got an extension back on Dec. 31, 2012.
If it comes up again and we have to pass an extension, there are going to be arguments, with some saying we're going to have to pass a two-year extension, instead of one year — to not be debating this again during an election year, even though Congress has proven they can't get anything done in any year, so that argument doesn't really hold water (slightly laughing).
But suffice to say, it's very possible they'll push for two-year extension, instead of a one-year.
You also have some members of congress, who say, if you're going to extend the farm bill, it's not going to extend it in tact. You have to have reform on direct payments, because they've already agreed they have to disappear.
So, it's possible we end up with an extension, and the cost is getting rid of direct payments. That's a very heavy price to pay for getting no more than two years of farm policy.
4. Many farmers have expressed support of getting rid of direct payments, because commodity prices today make farming profitable enough to where they're not needed. But, for giving up direct payments, they wanted the crop insurance programs to be strengthened. Could that possibly not happen under the next farm bill extension?
A. Giving up direct payments for a strengthened crop insurance program was the fundamental trade off. Much of the savings from cutting direct payments would be invested into an updated or enhanced commodity program safety net, as well as an expanded crop insurance safety net.
But that might not be the case under the next extension, because Congress will still want to cut spending, and direct payments are already a target.
5. What are the long-term impacts of such a move?
A. If you give up direct payments without investing some of those savings into a strengthened crop insurance program, and all that comes from the extension and that sacrifice is the budget savings, there will be less dollars to work with when considering a boarder farm bill two years from now.
In general, you make cuts, all you get is two years of policy and savings, and then you have little budget baseline to work with in 2015. ❖