Posted by: Phillip Fraas
December 21, 2007
Topic: REPORTS ON FARM BILL STATUS--Second Half of 2007

The Senate completed its work on the 2007 farm bill last Friday, setting the stage for joint House-Senate conference committee meetings early next year to resolve differences between the Senate legislation and the farm bill passed by the House last July.

The so-called "conference" is an important part of the legislative process for any bill; and when a conference committee is considering a large and complicated proposal such as the farm bill, it has the added opportunity to ignore much of the Senate and House bills and draft with a third version that isn't necessarily anchored in either the House or Senate bill. And, it is that third version that counts, because that is one that Congress casts its final vote on and that the President signs or vetoes.

Of course, here the conference bill (referred to as the "conference report") undoubtedly will include a lot that is common to both the House and Senate-passed bills--a continuation of the current farm support loan and payment mechanisms; the introduction of revenue-based counter-cyclical payments; expanded support of alternative energy production; new programs for the fruit and vegetable industries; and so on.

Beyond that, the circumstances under which the conference does its work will be different that those that applied when the House and Senate agriculture committees began their consideration of the farm bill earlier this year; and those changed circumstances could dictate some major changes to the new farm bill.

Primarily, I am referring to the budget stalemate that has arisen between Congress and the Administration on the farm bill. Both the Senate and House bills would increase spending for existing farm bill programs (the majority of which, by the way, goes for nutrition assistance to low-income Americans, not to farmers) and add new programs, especially ones to facilitate the development of alternative, biomass energy production, and both bills include provisions to increase tax revenues to pay for the added spending.

The problem is that the Administration is strongly opposed to the revenue-raisers. Just this Wednesday, Acting Secretary of Agriculture Chuck Conner, in a speech before a commodity group in Washington, stated that because of the revenue enhancers and because neither the Senate or House bill has enough farm program reforms "the President's senior advisers . . . are recommending that he veto the farm bill as it now stands coming out of th House and Senate."

While the veto threat is real and it is hard to envision how a compromise is possible on spending since the Administration adamantly opposes any revenue-raising measures, what has taken place over the past few days on other spending legislation--the omnibus appropriations bill and energy bill, both of which passed and the President approved--suggests that a solution to this knotty problem might yet be possible.

What happened with those other bills is that the Administration gave some on added spending as long as Congress didn't include tax increases to pay for the new outlays. In turn, Congress dropped its insistence on "pay-go," that is, making sure that any legislation that increases spending has offsetting spending cuts in other programs or revenue enhancements to keep the legislation budget-neutral.

And, keep in mind that the Administration's own farm bill proposal would have increased farm bill spending by about $5 billion over ten years and did not include tax increases to pay for the increases.

If the Administration accepts some increased spending without revenue raising and Congress doens't insist on applying "pay-go" to the bill, then it becomes simply a matter of hard bargaining on how much of an increase and to what programs are the increases allotted to.

Another new factor that the farm bill conference will have to consider is the enactment of the energy bill. That legislation included an increase in the renewable fuel standards, and authorized other initiatives to spur biomass fuel production. The conferees will have to review what the energy bill already has done, and tailor the farm bill energy title to compliment that legislation.

Finally, there is the intangible of the rapid rise in commodity prices recently. $4.40 corn, $10 wheat, and $12 soybeans at a time when production is not being decimated by natural disasters such as drought should give the Administration some ammunition in arguing for farm program reform that would cut back on Federal benefits. Of course, the counter-arguments can be made that high prices for commodities are being accompanied by high prices for inputs such as fuel and that commodity prices can turn south very quickly if world supplies expand. Nonetheless, with farmers enjoying market prices they haven't seen for 30 years and thus being much less dependent on government programs to cover their costs, the Administration will make hammer on the point that now is the time to enact program reforms that reduce spending.

In sum, look for the conference committee possibly to craft a farm bill that is a second generation to the House and Senate-passed versions--farm bill 2.0. Merry Christmas and happy holidays!

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