Craig Jagger Craig Jagger Chief Economist Chief Economist House Committee on Agriculture House Committee on Agriculture 2004 SAAS Meetings 2004 SAAS Meetings Tulsa, Oklahoma Tulsa, Oklahoma February 17, 2004 February 17, 2004 [email protected][email protected]202 225-1130 202 225-1130 Commodity Models and Their Contribution to Commodity Models and Their Contribution to Congressional Policy-Making: Reflections Congressional Policy-Making: Reflections from the 2002 Farm Bill and Beyond from the 2002 Farm Bill and Beyond
Transcript
Craig JaggerCraig Jagger
Chief EconomistChief EconomistHouse Committee on Agriculture House Committee on Agriculture
2004 SAAS Meetings2004 SAAS Meetings
Tulsa, OklahomaTulsa, OklahomaFebruary 17, 2004 February 17, 2004
Commodity Models and Their Contribution to Commodity Models and Their Contribution to Congressional Policy-Making: Reflections from Congressional Policy-Making: Reflections from
the 2002 Farm Bill and Beyondthe 2002 Farm Bill and Beyond
Funding BalanceFunding BalanceThe 10-Year CBO Score shows the House puts more The 10-Year CBO Score shows the House puts more
money in commodity programs (for all crops & money in commodity programs (for all crops & dairy)dairy)
than does the Senate than does the Senate (CBO score: FY 02 – 11)(CBO score: FY 02 – 11)
48.8
15.8
8.9
39.6
21.5
12.4
$0
$10
$20
$30
$40
$50
$60
Commodities Conservation Other
$ B
illio
n
H.R. 2646 S. 1731 Sub + Scored Amend.
The Senate 5-Year (4 to 6-year) bill Front-Loads The Senate 5-Year (4 to 6-year) bill Front-Loads total spending relative to the 10-year farm program total spending relative to the 10-year farm program
1st 5 Yrs: 02- 06 2nd 5 Yrs: 07- 11 All 10 Yrs: 02- 11Fiscal Years
$ B
illio
n
H.R. 2646 S. 1731 Sub + Scored Amend.
Loan RatesLoan Rates::
Why Encourage Any More Production WhenWhy Encourage Any More Production WhenWe Already Have Surpluses?We Already Have Surpluses?
The Senate’s higher loan rates cause larger increases in The Senate’s higher loan rates cause larger increases in production and lower prices for most major field crops production and lower prices for most major field crops
than do the House’s decoupled payments and loan rate than do the House’s decoupled payments and loan rate adjustments.adjustments.
Change in: House Senate
9- Crops: 2002 Planted Ac.. +1.46 mil. + 2.81 mil.
2002 Crop Prices:
Upland Cotton - 0.5 cents - 0.4 cents
Wheat: - 3 cents - 6 cents
Corn: - 3 cents - 5 cents
Soybeans: + 7 cents + 9 cents
Source: FAPRI
Primary Sources of Analyses of 2002 Farm Bill Primary Sources of Analyses of 2002 Farm Bill Proposals for the House Ag Committee (p. 1)Proposals for the House Ag Committee (p. 1)
Commodity Program Proposals:Commodity Program Proposals: Change in Government costs (Congressional Budget Office)Change in Government costs (Congressional Budget Office) Impacts on farm income (FAPRI)Impacts on farm income (FAPRI) Effects on supply, demand, and prices for selected commodities (FAPRI)Effects on supply, demand, and prices for selected commodities (FAPRI) Little interest in full-blown welfare analyses or direct economic Little interest in full-blown welfare analyses or direct economic
efficiency arguments efficiency arguments
Relative impact on farmers in Relative impact on farmers in mymy district. district. (FAPRI—state level estimates)(FAPRI—state level estimates) (AFPC—representative farm analyses)(AFPC—representative farm analyses) (State Land-Grant economists)(State Land-Grant economists)
Note: CBO and FAPRI and affiliates have institutional roles in the Note: CBO and FAPRI and affiliates have institutional roles in the legislative process. Because each uses a consistent baseline and legislative process. Because each uses a consistent baseline and has consistent models, results can be compared across numerous has consistent models, results can be compared across numerous options.options.
Primary Sources of Analyses of 2002 Farm Bill Primary Sources of Analyses of 2002 Farm Bill Proposals for the House Ag Committee (p. 2)Proposals for the House Ag Committee (p. 2)
Impacts on Selected Major TopicsImpacts on Selected Major Topics Payment Limits: Special Studies from University of Arkansas, Kansas Payment Limits: Special Studies from University of Arkansas, Kansas
State University, University of Illinois, Georgia ExtensionState University, University of Illinois, Georgia Extension Peanuts: University of GeorgiaPeanuts: University of Georgia
Consultation on Other IssuesConsultation on Other Issues USDA/USTR: Farm Service Agency, Economic Research Service, USDA/USTR: Farm Service Agency, Economic Research Service,
Foreign Agriculture Service, Office of the Chief Economist, Other USDA Foreign Agriculture Service, Office of the Chief Economist, Other USDA agenciesagencies
Office of the U.S. Trade RepresentativeOffice of the U.S. Trade Representative Numerous Land-Grant University EconomistsNumerous Land-Grant University Economists Other Congressional support agencies: Congressional Research Other Congressional support agencies: Congressional Research
Service & the General Accounting OfficeService & the General Accounting Office OthersOthers
Farm Bill Principles:Farm Bill Principles:The House PerspectiveThe House Perspective
Retain and Enhance Market-Oriented Provisions of the 1996 Farm Retain and Enhance Market-Oriented Provisions of the 1996 Farm BillBill
Increase Automatic Counter-Cyclical Income SupportIncrease Automatic Counter-Cyclical Income Support
Appropriately Balance Funding for Commodity Programs, Appropriately Balance Funding for Commodity Programs, Conservation Programs, and other Programs. Conservation Programs, and other Programs.
Comply with Budget Limits Comply with Budget Limits
Provide Consistent Programs For All YearsProvide Consistent Programs For All Years
Comply with WTO ObligationsComply with WTO Obligations
Other ConsiderationsOther Considerations
Is it acceptable to organized interest groups and others Is it acceptable to organized interest groups and others who are affected?who are affected?
How does it impact Members’ districts and constituents?How does it impact Members’ districts and constituents?
Can acceptable compromises be found with the Senate: Can acceptable compromises be found with the Senate: For the For the 2002 farm bill: 63 days of conference with 9 days of 2002 farm bill: 63 days of conference with 9 days of formal member meetingsformal member meetings
Will the Administration support it?Will the Administration support it?
Program costs are critical to the policy process. How best to Program costs are critical to the policy process. How best to capture that one point-estimate that the Congress needs? capture that one point-estimate that the Congress needs?
How are markets changing—what will the future bring both How are markets changing—what will the future bring both with or without a new policy: The Baseline issue.with or without a new policy: The Baseline issue.
How will USDA implement programs? What will really happen? How will USDA implement programs? What will really happen?
How will the administration treat programs relative to the How will the administration treat programs relative to the WTO?WTO?
Consistency across numerous variations on a proposal is Consistency across numerous variations on a proposal is crucial.crucial.
Why Estimated Program Costs MatterWhy Estimated Program Costs Matter
• If a bill is estimated (by CBO) to increase spending above If a bill is estimated (by CBO) to increase spending above baseline levels, then a Member baseline levels, then a Member maymay raise a budget point of raise a budget point of order.order.
• If the point of order is upheld by the parliamentarian, then: If the point of order is upheld by the parliamentarian, then: • Senate: Passing the bill requires 60 votes rather than a Senate: Passing the bill requires 60 votes rather than a
simple majority.simple majority.• House: The bill cannot be considered (although the rules of House: The bill cannot be considered (although the rules of
debate can waive budget points of order by a majority vote)debate can waive budget points of order by a majority vote)
Baselines Matter: Change in Commodity Baselines Matter: Change in Commodity Program Costs as Estimated by CBOProgram Costs as Estimated by CBO
Commodity Programs: CCC Baselines: 2002 Farm Bill Forward
$0
$2,000
$4,000
$6,000
$8,000
$10,000
$12,000
$14,000
$16,000
$18,000
$20,000
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Fiscal Year
$ M
illi
on
04-01 Mixed Total FB 03-02 Mixed Total FB '08-02 Determ Base 01-03 Stoch Base
03-03 Stoch Base 08-03 Stoch Base 12-03 Stoch Base
Why Do Stochastic Why Do Stochastic Analysis?Analysis?
The baseline is The baseline is alwaysalways wrong wrong Rather than measuring impacts of a policy against one set Rather than measuring impacts of a policy against one set
of baseline assumptions, stochastic analysis measures the of baseline assumptions, stochastic analysis measures the impacts of a policy against many sets of baseline impacts of a policy against many sets of baseline assumptions and reports an expected value. assumptions and reports an expected value.
CBO’s introduction for the 1996 farm bill of “probability CBO’s introduction for the 1996 farm bill of “probability scoring”:scoring”: Has led to better cost estimates for price-dependent Has led to better cost estimates for price-dependent
programsprograms Has reduced the number of policy proposals (and enacted Has reduced the number of policy proposals (and enacted
policy) that rely on budget gimmicks.policy) that rely on budget gimmicks.
Stochastic Analysis has become the analytical standard Stochastic Analysis has become the analytical standard on the Hillon the Hill The Congressional Budget Office with the 1996 farm billThe Congressional Budget Office with the 1996 farm bill All of FAPRI’s analyses prepared for the 2001/2002 farm bill All of FAPRI’s analyses prepared for the 2001/2002 farm bill
debate have been stochastic analyses. debate have been stochastic analyses.
Deterministic vs. Stochastic Deterministic vs. Stochastic ConsiderationsConsiderations
U.S. Limit on Trade-Distorting Amber Box Domestic U.S. Limit on Trade-Distorting Amber Box Domestic Support = $19.1 billionSupport = $19.1 billion
Lots of discretion:Lots of discretion: How will countries implement programs?How will countries implement programs? How will countries notify program costs?How will countries notify program costs?
Brazil’s WTO cotton case could have a major impact.Brazil’s WTO cotton case could have a major impact.
Westhoff and others: Westhoff and others: It is safe to assume that countries It is safe to assume that countries will use whatever discretion they have to minimize harm will use whatever discretion they have to minimize harm to influential groups (?)to influential groups (?)
A Few Comments on Other A Few Comments on Other PapersPapers
The Next Farm Bill: 2006, 2005, 2004?The Next Farm Bill: 2006, 2005, 2004?
Budget Reconciliation and the Farm BillBudget Reconciliation and the Farm Bill
• Budget Reconciliation instructions are Budget Reconciliation instructions are instructionsinstructions in the in the Congress’s Budget Resolution to authorizing committees (e.g. Congress’s Budget Resolution to authorizing committees (e.g. the Ag Committees) to draft changes to existing laws to achieve the Ag Committees) to draft changes to existing laws to achieve specified budgetary results. specified budgetary results.
• Usually, they have been used to mandate government-wide Usually, they have been used to mandate government-wide reductions in mandatory spending programs to reduce the reductions in mandatory spending programs to reduce the federal budget deficit.federal budget deficit.
The FY 04 Budget Resolution (Spring, 2003) and The FY 04 Budget Resolution (Spring, 2003) and Budget Reconciliation: Budget Reconciliation:
• House Bill: Reconciliation instructions with cuts for most House Bill: Reconciliation instructions with cuts for most committeescommittees
• Agriculture Cut: $18.6 Billion for FY 04 -13 (about 4%).Agriculture Cut: $18.6 Billion for FY 04 -13 (about 4%).• Cuts could come from any Ag Committee program: Cuts could come from any Ag Committee program:
In FY 04, the Total Deficit and On-Budget Deficits at $477In FY 04, the Total Deficit and On-Budget Deficits at $477and $631 Billion are Projected Record Large in and $631 Billion are Projected Record Large in NominalNominal
DollarsDollars
BUT the Deficits Are Projected to Decline AND BUT the Deficits Are Projected to Decline AND as a % of GDP Are NOT Record Largeas a % of GDP Are NOT Record Large
A Counter-Cyclical Payment ExampleA Counter-Cyclical Payment Exampleof Probability Scoringof Probability Scoring
• Deterministic Analysis:Deterministic Analysis: • Compare the one baseline forecast market price to a target price. As long as Compare the one baseline forecast market price to a target price. As long as
that one price is above the target price, no cost is scored.that one price is above the target price, no cost is scored.• Policy Proposal: Raise the target price to just below the baseline forecast Policy Proposal: Raise the target price to just below the baseline forecast
market price. No cost is scored because the market price is still below the market price. No cost is scored because the market price is still below the target price. target price.
• This is a one-sided bet because if the actual price is above the forecast price, This is a one-sided bet because if the actual price is above the forecast price, there is no cost but if the actual price is below the forecast price, there is a there is no cost but if the actual price is below the forecast price, there is a cost.cost.
• Stochastic Analysis:Stochastic Analysis:• Recognize that the baseline forecast market price is actually one price (e.g. Recognize that the baseline forecast market price is actually one price (e.g.
the mean) from a price probability distribution of plausible prices.the mean) from a price probability distribution of plausible prices.• Compare each forecast price from the probability distribution to a target Compare each forecast price from the probability distribution to a target
price, calculate the cost for each price, multiply the cost for each price times price, calculate the cost for each price, multiply the cost for each price times the probability of each price occurring, then sum the results to calculate an the probability of each price occurring, then sum the results to calculate an expected program cost.expected program cost.
• Even when the mean baseline forecast market price is above the target price, Even when the mean baseline forecast market price is above the target price, there is a cost--as long as part of the price distribution is below the target there is a cost--as long as part of the price distribution is below the target priceprice..
Stochastic Analysis May Influence The Stochastic Analysis May Influence The Types of Benefits to Producers: Types of Benefits to Producers:
The Senate Farm Bill ExampleThe Senate Farm Bill Example
• House farm bill: Constant fixed payment rates for all yearsHouse farm bill: Constant fixed payment rates for all years• Senate farm bill: Last-year fixed rates that were 25% of the first-year Senate farm bill: Last-year fixed rates that were 25% of the first-year
rates. This took advantage of CBO baseline prices that rose over time and rates. This took advantage of CBO baseline prices that rose over time and stochastic analysis that gives a lower cost for each cent of potential stochastic analysis that gives a lower cost for each cent of potential counter-cyclical payment than for each cent of fixed payment.counter-cyclical payment than for each cent of fixed payment.
• $0.01 of fixed payment = $0.01 of stochastic cost$0.01 of fixed payment = $0.01 of stochastic cost• $0.01 of counter-cyclical payment = Less than $0.01 of stochastic cost. $0.01 of counter-cyclical payment = Less than $0.01 of stochastic cost.
Stochastic cost depends on the relationship between the mean price of Stochastic cost depends on the relationship between the mean price of the price distribution and the target price:the price distribution and the target price:
• The The lowerlower the mean price relative to the target price, the the mean price relative to the target price, the higherhigher the stochastic the stochastic cost as more of the price distribution is “in the money.”cost as more of the price distribution is “in the money.”
• The The higherhigher the mean price relative to the target price, the the mean price relative to the target price, the lowerlower the stochastic the stochastic cost as less of the price distribution is “in the money.cost as less of the price distribution is “in the money.
• By making the counter-cyclical payment a larger share of combined fixed By making the counter-cyclical payment a larger share of combined fixed and counter-cyclical payments in the last year when the baseline price is and counter-cyclical payments in the last year when the baseline price is higher, combined payments are smaller and a given amount of money higher, combined payments are smaller and a given amount of money goes further. This allows the nominal target price of the Senate Bill to be goes further. This allows the nominal target price of the Senate Bill to be higher than that of the House bill even when the expected value of the higher than that of the House bill even when the expected value of the benefits is the same.benefits is the same.
What Does the Farm Security and Rural What Does the Farm Security and Rural Investment Act of 2002 (The 2002 Farm Bill) Investment Act of 2002 (The 2002 Farm Bill)
Do?Do?
The 2002 farm bill is a six-year bill thatThe 2002 farm bill is a six-year bill that:: Reauthorizes farm (and other) USDA programs through 2007 Reauthorizes farm (and other) USDA programs through 2007
and covers the 2002 through 2007 crops.and covers the 2002 through 2007 crops.
Development, Research, Forestry, Energy, and Miscellaneous Development, Research, Forestry, Energy, and Miscellaneous programs.programs.
Provides additional funding (above the baseline) for these Provides additional funding (above the baseline) for these
programs over the next 10 years by $73.5 billion (?), $82.8 programs over the next 10 years by $73.5 billion (?), $82.8 billion (?), Maybe More (?), Maybe Less (?). BUT billion (?), Maybe More (?), Maybe Less (?). BUT We Really We Really Don’t KnowDon’t Know..
A Presentation byA Presentation by
Craig JaggerCraig Jagger
Chief EconomistChief EconomistHouse Committee on Agriculture House Committee on Agriculture
A Department of Agricultural Economics SeminarA Department of Agricultural Economics SeminarTexas A & M UniversityTexas A & M University
College Station, TXCollege Station, TXJanuary 13, 2004January 13, 2004
Show Me the Money: How the Budget Show Me the Money: How the Budget Helps Shape U.S. Farm PolicyHelps Shape U.S. Farm Policy
The Budget is Important to Farm Policy:The Budget is Important to Farm Policy:
Government Payments Continue to Be a Major Government Payments Continue to Be a Major Contributor to U.S. Net Farm IncomeContributor to U.S. Net Farm Income
Government payments averaged 29% of net farm income over the Government payments averaged 29% of net farm income over the last last
10 years, 39% over the last 4 years, and 35% (forecast) for 200310 years, 39% over the last 4 years, and 35% (forecast) for 2003
U.S. Net Farm I ncome: Calendar Years
1981 to 2003 Forecast
$0
$10
$20
$30
$40
$50
$60
$70
81 83 85 87 89 91 93 95 97 99 01 03F
Calendar Year
$ B
illio
n
Net Farm I ncome LESS Government Payments Direct Government Payments
Craig Jagger
Commodity Credit Corporation and Crop Insurance Commodity Credit Corporation and Crop Insurance Outlays Averaged $21 Billion Per Year During the 5 Outlays Averaged $21 Billion Per Year During the 5
Fiscal Years 1998-2002Fiscal Years 1998-2002
CCC & Crop I nsurance Outlays by Fiscal Year:
Actuals, 1981 - 2002
$0
$10
$20
$30
$40
81 83 85 87 89 91 93 95 97 99 01 03
Fiscal Year
$ B
illion
Total CCC Outlays Crop I nsurance
Over the last 10 years CCC + FCIC spending has Over the last 10 years CCC + FCIC spending has averagedaveraged
25% of Total USDA Spending25% of Total USDA Spending
Non-Farm Program Spending is Much Less Variable Non-Farm Program Spending is Much Less Variable
than Farm Program Spendingthan Farm Program Spending
Total USDA Outlays by Fiscal Year:
Actuals, 1981 - 2002
$0
$10
$20
$30
$40
$50
$60
$70
$80
81 83 85 87 89 91 93 95 97 99 01 03
Fiscal Year
$ B
illio
n
Total CCC Outlays Crop I nsurance Other USDA Outlays
Total Federal Outlays (Nominal $) Keep Total Federal Outlays (Nominal $) Keep Increasing; They Exceeded $2 Trillion for the Increasing; They Exceeded $2 Trillion for the
First Time in FY 2002First Time in FY 2002
Total USDA Outlays (Including Non-Farm Outlays) TypicallyTotal USDA Outlays (Including Non-Farm Outlays) Typically
Are 3% to 5% of Total Federal OutlaysAre 3% to 5% of Total Federal Outlays
Total Federal Outlays & USDA Outlays by
Fiscal Year: Actuals, 1981 - 2002
$0
$250
$500
$750
$1,000
$1,250
$1,500
$1,750
$2,000
$2,250
81 83 85 87 89 91 93 95 97 99 01 03
Fiscal Year
$ B
illion
Total Federal Outlays Excluding USDA USDA Outlays
Federal Budget Surpluses Are InfrequentFederal Budget Surpluses Are Infrequent
The Last On-Budget Federal Surplus Before FY 1999 was in The Last On-Budget Federal Surplus Before FY 1999 was in FY 1960; The Last Total Federal Surplus Before FY 1998 was FY 1960; The Last Total Federal Surplus Before FY 1998 was
in FY 1969.in FY 1969.
Surplus
Federal On & Off - Budget Surplus or Deficit by
Fiscal Year: Actuals, 1981- 2002
-$400
-$300
-$200
-$100
$0
$100
$200
$300
81 83 85 87 89 91 93 95 97 99 01 03
Fiscal Year
$ B
illio
n
On-Budget Surplus or Defi cit Off -Budget Surplus or Defi cit Total Surplus or Defi cit
Surplus
Deficit
The Budget (and Budget Analysis) is The Budget (and Budget Analysis) is Important to Farm Policy (and the Important to Farm Policy (and the
75: Percent of the 4 House and Senate Ag Committee 75: Percent of the 4 House and Senate Ag Committee economistseconomists
who are former Congressional Budget Office who are former Congressional Budget Office (CBO) analysts.(CBO) analysts.
1: Farm program outlays as a percent of total federal 1: Farm program outlays as a percent of total federal budgetbudget
outlays. outlays. 6: The 3 CBO ag budget analysts as a percent of the 47 6: The 3 CBO ag budget analysts as a percent of the 47
CBOCBO budget analysts who cover the entire federal budget.budget analysts who cover the entire federal budget.
The Congressional Budget Office (CBO) The Congressional Budget Office (CBO)
Baselines and Cost EstimatesBaselines and Cost Estimates
The CBO Baseline: The CBO Baseline: Expected federal budget costs for the current and next 10 fiscal yearsExpected federal budget costs for the current and next 10 fiscal years Assumes current laws and policies continue: no new laws are passed Assumes current laws and policies continue: no new laws are passed
and, with some exceptions, current laws do not expire.and, with some exceptions, current laws do not expire. Incorporates current and projected market conditions, economic Incorporates current and projected market conditions, economic
trends, and USDA implementation decisionstrends, and USDA implementation decisions
A CBO Cost Estimate (score) shows the A CBO Cost Estimate (score) shows the differencedifference over the next over the next ten years between:ten years between: Expected federal costs if a new proposal becomes law andExpected federal costs if a new proposal becomes law and Expected federal costs if current laws are assumed to continue (the Expected federal costs if current laws are assumed to continue (the
baseline)baseline)
RememberRemember: the score shows the : the score shows the changechange in spending--NOT in spending--NOT total total spending.spending.
Congressional Budget Rules for Farm Congressional Budget Rules for Farm Programs (and Other Mandatory Spending)Programs (and Other Mandatory Spending)
• Most farm programs are entitlement (mandatory) programs Most farm programs are entitlement (mandatory) programs under the jurisdiction of the Agriculture Committeesunder the jurisdiction of the Agriculture Committees
• Costs of entitlement programs are determined by the cost Costs of entitlement programs are determined by the cost of providing benefits to participating eligible recipientsof providing benefits to participating eligible recipients
• Multi-year funding for mandatory programs is provided in Multi-year funding for mandatory programs is provided in the budget at the time a law is passed. No annual the budget at the time a law is passed. No annual appropriation (or any other new legislation) is needed to appropriation (or any other new legislation) is needed to spend money.spend money.
• The following budget rules are for mandatory programs. The following budget rules are for mandatory programs.
Appropriated (discretionary) programs are under the Appropriated (discretionary) programs are under the jurisdiction of the Appropriations Committees, are funded jurisdiction of the Appropriations Committees, are funded annually, and have different budget rules)annually, and have different budget rules)
The Annual Congressional Budget The Annual Congressional Budget ResolutionResolution
• Specifies Specifies maximummaximum authorized spending for each of the next authorized spending for each of the next 5 or 10 years5 or 10 years
• Budget Resolution Baseline: CBO’s baseline projection of Budget Resolution Baseline: CBO’s baseline projection of spending if current programs spending if current programs continue unchangedcontinue unchanged PLUS any PLUS any changes authorized by the Congress in the budget resolution. changes authorized by the Congress in the budget resolution.
• ““Reconciliation” instructions, if any, specify each committee’s Reconciliation” instructions, if any, specify each committee’s contribution to government spending cuts (see below).contribution to government spending cuts (see below).
Strategies for Funding New Farm Strategies for Funding New Farm Programs or Increasing Spending Programs or Increasing Spending
on Current Oneson Current Ones
1. Provide additional funding up-front in the Congress’s annual 1. Provide additional funding up-front in the Congress’s annual budget resolution.budget resolution.
2. Declare an emergency (if the rest of the Congress and the 2. Declare an emergency (if the rest of the Congress and the President agree).President agree).
3. Offset the increased cost by reducing costs of other farm 3. Offset the increased cost by reducing costs of other farm programs (or non-farm programs).programs (or non-farm programs).
4. Legislate on appropriations4. Legislate on appropriations
5. Find the votes to increase spending without offsets (i.e. 5. Find the votes to increase spending without offsets (i.e. override any budget points of order).override any budget points of order).
Strategy 1: Provide Extra Funding in the Strategy 1: Provide Extra Funding in the Congressional Budget Resolution Congressional Budget Resolution
A Favored Strategy for Major Farm Policy Reform A Favored Strategy for Major Farm Policy Reform EffortsEfforts
• 1994 Crop Insurance Reform: $1 billion per year. Law passed.1994 Crop Insurance Reform: $1 billion per year. Law passed.
• 2000 Agricultural Risk Protection Act:2000 Agricultural Risk Protection Act:• 1999: $6 billion over 4 years for new risk management. Not 1999: $6 billion over 4 years for new risk management. Not
Completed.Completed.• 2000: Increased 1999 funding to $8.2 billion over 5 years. Law 2000: Increased 1999 funding to $8.2 billion over 5 years. Law
passed. passed.
• 2002 Farm Security and Rural Investment Act:2002 Farm Security and Rural Investment Act:• 2001: $79 billion over 11 years for the ag safety net and other 2001: $79 billion over 11 years for the ag safety net and other
agriculture programs. agriculture programs. • $5.5 billion for 2001 Market-Loss Assistance passed. $5.5 billion for 2001 Market-Loss Assistance passed. • $73.5 billion left for Farm Bill that was not completed.$73.5 billion left for Farm Bill that was not completed.
• 2002: Continued 2001 funding consistent with 2001 levels. Law 2002: Continued 2001 funding consistent with 2001 levels. Law passed. passed.
A Major Rationale for Extra Funding for the 2002 A Major Rationale for Extra Funding for the 2002 Farm Bill Was to Eliminate “Emergency” Ad Hoc Farm Bill Was to Eliminate “Emergency” Ad Hoc
Market-Loss Payments Enacted Due to Low Prices Market-Loss Payments Enacted Due to Low Prices in Prior Yearsin Prior Years
Commodity Credit Corporation & FSRI A Conservation Fund
Outlays by Fiscal Year: 1981 - 2013Actuals bef ore FY 03; CBO August, 2003 Projections f or FY 03 +
Total CCC Exclude Conservat ion & MLA Market Loss Assistance (MLA)
Conservat ion: CCC Fund Conservat ion: FSRI A Fund
The Budget Reality:The Budget Reality:
Projected surpluses that facilitated extra funding for Projected surpluses that facilitated extra funding for the 2002 farm bill have disappearedthe 2002 farm bill have disappeared
Total Federal Surplus (+) or Deficit (- )On- Budget + Off - Budget Accounts
Actuals as of March 2003 J anuary 2001 CBO Proj . August 2003 CBO Proj .
Surplus
Deficit
Strategy 2: Designate Spending as an Strategy 2: Designate Spending as an EmergencyEmergency
From FY 1989 to FY 2001, 21 Acts Added From FY 1989 to FY 2001, 21 Acts Added $43.8 Billion$43.8 Billion in Emergency Funding for USDA in Emergency Funding for USDA
Programs.Programs.
Emergency Spending for Agriculture: Annual Funding
Additions by Fiscal Year: 1989 - 2001
$0
$2
$4
$6
$8
$10
$12
$14
$16
1989 1991 1993 1995 1997 1999 2001
Fiscal Year
$ B
illion
Source: Congressional Research ServiceSource: Congressional Research Service
Emergency SpendingEmergency Spending
• Must be designated as such by both the Congress and the President. Must be designated as such by both the Congress and the President.
• Does not count against the budget for legislative purposes.Does not count against the budget for legislative purposes.
• Is real spending when the checks are issued.Is real spending when the checks are issued.
• Is not defined by statute or rules. Anything on which the President Is not defined by statute or rules. Anything on which the President and Congress can agree is an emergency.and Congress can agree is an emergency.
• The FY 04 Budget Resolution requires an explanation of how spending The FY 04 Budget Resolution requires an explanation of how spending designated as an emergency meets the criteria of:designated as an emergency meets the criteria of:
• Necessary, essential, or vital (not merely useful or beneficial)Necessary, essential, or vital (not merely useful or beneficial)• Sudden, quickly coming into being, and not building up over time.Sudden, quickly coming into being, and not building up over time.• An urgent, pressing, and compelling need requiring immediate action.An urgent, pressing, and compelling need requiring immediate action.• Unforeseen (i.e., Not part of a bundle of anticipated emergencies normally Unforeseen (i.e., Not part of a bundle of anticipated emergencies normally
estimated in advance), unpredictable, and unanticipatedestimated in advance), unpredictable, and unanticipated• Not permanent, temporary in nature.Not permanent, temporary in nature.
The Budget RealityThe Budget Reality
Emergency Spending: Emergency Spending: Is Off-Budget Now Off-Limits?Is Off-Budget Now Off-Limits?
• 2001/2002 Crop Disaster Assistance was not declared an 2001/2002 Crop Disaster Assistance was not declared an “emergency”“emergency”
• The Administration insisted that disaster assistance be The Administration insisted that disaster assistance be offset by offset by cuts in spending for other agriculture programscuts in spending for other agriculture programs: :
• Following a Senate proposal, the bill capped out-year costs of Following a Senate proposal, the bill capped out-year costs of the yet-to-be-implemented Conservation Security Programthe yet-to-be-implemented Conservation Security Program
• If this is a precedent, then If this is a precedent, then ALL farm program beneficiaries ALL farm program beneficiaries whose programs could be cutwhose programs could be cut have a stake in disaster have a stake in disaster assistance legislation--not just those suffering disasters.assistance legislation--not just those suffering disasters.
Strategy 3: Offset Increased Costs for Strategy 3: Offset Increased Costs for New Programs by Cutting Costs of New Programs by Cutting Costs of
CurrentCurrentor Other Proposed Programsor Other Proposed Programs
• Key Question: What’s the least painful way to find savings in Key Question: What’s the least painful way to find savings in other programs?other programs?
• Offsets can only be from legislated changes—not from lower Offsets can only be from legislated changes—not from lower than expected costs when actual market conditions are than expected costs when actual market conditions are different than originally projected.different than originally projected.
• Timing Shifts: Timing Shifts: • It only costs if it’s in the scoring period.It only costs if it’s in the scoring period.• Shifting the payment of an earned benefits outside the scoring Shifting the payment of an earned benefits outside the scoring
period saves money. period saves money. • Why the second direct payment occurs in the next fiscal year.Why the second direct payment occurs in the next fiscal year.
• Baseline Re-EstimatesBaseline Re-Estimates• For each new baseline, CBO incorporates new information on market For each new baseline, CBO incorporates new information on market
conditions, USDA implementation decisions, etc. conditions, USDA implementation decisions, etc. • If a new program’s spending has no cap, the CBO score at passage If a new program’s spending has no cap, the CBO score at passage
may turn out to have been an underestimate may turn out to have been an underestimate • Saving can be had by capping spending at levels higher than Saving can be had by capping spending at levels higher than
originally scored.originally scored.• Why advocates don’t want to cap mandatory spending programs.Why advocates don’t want to cap mandatory spending programs.
• CBO May, 2002 Farm Bill Estimate--No funding capCBO May, 2002 Farm Bill Estimate--No funding cap• FY 02 – FY 11: $2.000 BillionFY 02 – FY 11: $2.000 Billion
• CBO March, 2004 Baseline (?)CBO March, 2004 Baseline (?)• Pending FY 2004 Omnibus Appropriation conference bill removes the Pending FY 2004 Omnibus Appropriation conference bill removes the
10-year cap but caps FY 2004 spending at $41 million to save $12 10-year cap but caps FY 2004 spending at $41 million to save $12 millionmillion
Projected Spending for the Conservation Security Program (CSP) Is Projected Spending for the Conservation Security Program (CSP) Is 40% higher40% higher than When the Farm Bill Was Passed Even AFTER than When the Farm Bill Was Passed Even AFTER
Cutting $3.1 Billion to Offset 01/02 Disaster AssistanceCutting $3.1 Billion to Offset 01/02 Disaster Assistance
Strategy #4: Legislating on Strategy #4: Legislating on AppropriationsAppropriations
• Technically, the Appropriations Committees are not supposed to Technically, the Appropriations Committees are not supposed to legislate—i.e., change mandatory programs—in appropriations billslegislate—i.e., change mandatory programs—in appropriations bills
• But the Appropriators do so by limiting salaries and expenses to But the Appropriators do so by limiting salaries and expenses to implement a program.implement a program.
• Under different budget rules, when there are multi-year costs in an Under different budget rules, when there are multi-year costs in an approps bill, only the first year cost is scored. Out-year costs are approps bill, only the first year cost is scored. Out-year costs are not. not.
• This treatment allows the removal (without cost) of the cap on CSP This treatment allows the removal (without cost) of the cap on CSP funding that is pending in the FY 04 Omnibus Appropriationfunding that is pending in the FY 04 Omnibus Appropriation
• Before their expiration last year, “discretionary caps” on out-year Before their expiration last year, “discretionary caps” on out-year spending were adjusted downward to account for additional spending were adjusted downward to account for additional spending in later years. Although caps were often waived, this spending in later years. Although caps were often waived, this provided some additional budget discipline.provided some additional budget discipline.
Caveats on Offsetting Increased Caveats on Offsetting Increased Costs for New Programs by Cutting Costs for New Programs by Cutting
Costs ofCosts ofCurrent ProgramsCurrent Programs
• Proposed cuts may lead to interest group wars. Every program Proposed cuts may lead to interest group wars. Every program has a constituency. has a constituency.
• May make policy proposals that save money more attractive than May make policy proposals that save money more attractive than they otherwise would be. they otherwise would be.
• Can lead to “bad” policy if policies are designed to capture quirks Can lead to “bad” policy if policies are designed to capture quirks in CBO baselines or estimating assumptions. in CBO baselines or estimating assumptions.
• Cost trade-offs and savings opportunities can be heavily Cost trade-offs and savings opportunities can be heavily dependent on CBO Baselines and Scoring. dependent on CBO Baselines and Scoring.
• The Federal Budget, Congressional Budget Process, The Federal Budget, Congressional Budget Process, and CBO baselines and scoring conventions have a and CBO baselines and scoring conventions have a major role in shaping the types, timing, and benefit major role in shaping the types, timing, and benefit levels of farm policies.levels of farm policies.
• With ongoing projected budget deficits, reconciliation With ongoing projected budget deficits, reconciliation instructions to all committees—including agriculture--instructions to all committees—including agriculture--to reduce spending look inevitable for FY 2005—the to reduce spending look inevitable for FY 2005—the first budget after the 2004 elections.first budget after the 2004 elections.
• Spending cuts can come from any programs under Spending cuts can come from any programs under the Ag Committees’ jurisdictions but all program the Ag Committees’ jurisdictions but all program areas have powerful constituencies.areas have powerful constituencies.
Concluding CommentsConcluding Comments
Appendix:Appendix:CBO and the 2002 farm billCBO and the 2002 farm bill
CBO analysts were extremely dedicated in their service to the CBO analysts were extremely dedicated in their service to the Congress during the course of the 2002 Farm Bill debate—Congress during the course of the 2002 Farm Bill debate—working many late nights and long weekends.working many late nights and long weekends. Over a roughly 16-month period, the CBO Ag Team (and other CBO Over a roughly 16-month period, the CBO Ag Team (and other CBO
analysts) provided Members and staff an almost continuous stream analysts) provided Members and staff an almost continuous stream of well over 500 informal and formal costs estimates.of well over 500 informal and formal costs estimates.
Many proposals were difficult to score—e.g. updating base acres Many proposals were difficult to score—e.g. updating base acres and/or yields, rebalancing loan rates, the new Conservation and/or yields, rebalancing loan rates, the new Conservation Security Program.Security Program.
CBO’s adoption of “stochastic scoring” for the 1996 farm provides CBO’s adoption of “stochastic scoring” for the 1996 farm provides better estimates but is more difficult and less transparentbetter estimates but is more difficult and less transparent
But none of us are perfect.But none of us are perfect. After the Senate passed its Farm Bill, CBO discovered a simple After the Senate passed its Farm Bill, CBO discovered a simple
error that caused the score to be underestimated by $6.1 billion. error that caused the score to be underestimated by $6.1 billion. They had used an 85% factor for commodity program payments They had used an 85% factor for commodity program payments
(as in the House bill) rather than the 100% factor of the Senate bill.(as in the House bill) rather than the 100% factor of the Senate bill. The revised score was $79.6 billion—well above the available The revised score was $79.6 billion—well above the available
additional funding (and the original score) of $73.5 billion.additional funding (and the original score) of $73.5 billion.
CBO and the 2002 farm billCBO and the 2002 farm bill(Continued)(Continued)
One take (of many) on the $6 billion glitch: The Farm Bill One take (of many) on the $6 billion glitch: The Farm Bill Conference:Conference: Rep. Chambliss: “But I would remind the Senator we had the option of Rep. Chambliss: “But I would remind the Senator we had the option of
telling the Senate you are $6 billion over budget. Go back and redo telling the Senate you are $6 billion over budget. Go back and redo your bill and come back to us, but we did not do that. . . .”your bill and come back to us, but we did not do that. . . .”
Senator Conrad: “Can I just say to the gentleman that it is absolutely Senator Conrad: “Can I just say to the gentleman that it is absolutely true, because of the CBO mistake—again, it was not anybody’s fault, true, because of the CBO mistake—again, it was not anybody’s fault, but they made a mistake, and they misestimated our bill. But once we but they made a mistake, and they misestimated our bill. But once we went back to an 85-percent payment base, that took care of the went back to an 85-percent payment base, that took care of the problem. . . .problem. . . .
But it’s more difficult than presented: Without the extra $6 billion But it’s more difficult than presented: Without the extra $6 billion for commodity programs, it would have been even more difficult for commodity programs, it would have been even more difficult for the Senate to achieve a compromise on the funding allocation for the Senate to achieve a compromise on the funding allocation across commodity, conservation, and other programsacross commodity, conservation, and other programs
CBO and the 2002 farm billCBO and the 2002 farm bill(Continued)(Continued)
CBO’s alternative estimate at the end of the debate CBO’s alternative estimate at the end of the debate In response to requests from several high-ranking Senate and House In response to requests from several high-ranking Senate and House
members, CBO provided an informal cost estimate of the farm bill members, CBO provided an informal cost estimate of the farm bill based on March, 2002 market conditions--rather than the April, 2001 based on March, 2002 market conditions--rather than the April, 2001 market conditions on which the official farm bill score was based. market conditions on which the official farm bill score was based.
The new estimate showed an estimated ten-year cost of $82.8 billion--The new estimate showed an estimated ten-year cost of $82.8 billion--up from $73.5 billion. up from $73.5 billion.
The release of this estimate after the House--but before the Senate– The release of this estimate after the House--but before the Senate– passed the final farm bill was controversial. passed the final farm bill was controversial.
Given changed market conditions after March, 2002 (e.g. 2002 Given changed market conditions after March, 2002 (e.g. 2002 drought), commodity program spending is lower than projected drought), commodity program spending is lower than projected based on either baseline.based on either baseline. Lower costs because of market conditions different than projected at Lower costs because of market conditions different than projected at
the time a bill was passed cannot be spent elsewhere.the time a bill was passed cannot be spent elsewhere. Increased costs for crop insurance and other programs such as the Increased costs for crop insurance and other programs such as the
Conservation Security Program and Milk Income Loss Contracts provide Conservation Security Program and Milk Income Loss Contracts provide at least partial offsets for lower commodity program costs.at least partial offsets for lower commodity program costs.
Major Farm Bill ConstraintsMajor Farm Bill Constraints
Budget, Budget, Budget.Budget, Budget, Budget. The FY 2002 Congressional Budget Resolution provided an The FY 2002 Congressional Budget Resolution provided an
additional $73.5 billion in funding for FY 2002-2011.additional $73.5 billion in funding for FY 2002-2011. The amount was in addition to projected spending on CCC The amount was in addition to projected spending on CCC
programs of $97.6 billion in the April, 2001 CBO baseline.programs of $97.6 billion in the April, 2001 CBO baseline.
Proper BalanceProper Balance Commodity programs, conservation programs, and other program Commodity programs, conservation programs, and other program
areas all have enthusiastic supporters and detractors.areas all have enthusiastic supporters and detractors.
WTO AgreementWTO Agreement For the U.S. to be in compliance with WTO agreements, its costs of For the U.S. to be in compliance with WTO agreements, its costs of
“trade-distorting” domestic support programs can be no more than “trade-distorting” domestic support programs can be no more than $19.1 billion in a given year.$19.1 billion in a given year.
The Congressional Budget Office (CBO):The Congressional Budget Office (CBO):A Non-Partisan Congressional Support AgencyA Non-Partisan Congressional Support Agency
A CBO cost estimate (“score”) shows the A CBO cost estimate (“score”) shows the differencedifference over the next ten years over the next ten years between:between: Expected federal costs if a new proposal becomes law andExpected federal costs if a new proposal becomes law and Expected federal costs if current laws are assumed to continue (i.e., “the Expected federal costs if current laws are assumed to continue (i.e., “the
baseline).”baseline).” Remember: the score shows the Remember: the score shows the changechange in spending--NOT in spending--NOT totaltotal spending. spending.
CBO scores are important in the legislative process because of House and CBO scores are important in the legislative process because of House and Senate rules regarding increased spending.Senate rules regarding increased spending. If the score shows that spending would increase above the baseline and a Member If the score shows that spending would increase above the baseline and a Member
raises a budget point of order that is confirmed, then legislative hurdles for passing raises a budget point of order that is confirmed, then legislative hurdles for passing the bill increase.the bill increase.
Ways to get around a budget point of order include: change the proposal to Ways to get around a budget point of order include: change the proposal to reduce spending (as needed), find enough votes to waive the point of order, reduce spending (as needed), find enough votes to waive the point of order, designate the additional spending as “emergency spending,” provide additional designate the additional spending as “emergency spending,” provide additional funding in the Congress’s budget resolution baseline.funding in the Congress’s budget resolution baseline.
Unless overruled by the Budget Committee, the CBO score is binding.Unless overruled by the Budget Committee, the CBO score is binding.
What Economic Information Does theWhat Economic Information Does theCongress Need in the Future?Congress Need in the Future?
Don’t underestimate the importance of current, basic market information--Don’t underestimate the importance of current, basic market information--help us understand how things work and relatehelp us understand how things work and relate
But help us understand how agriculture is changing--help us understand But help us understand how agriculture is changing--help us understand what the future may bringwhat the future may bring
““Agricultural Outlook”-type articles communicate very well--especially for Agricultural Outlook”-type articles communicate very well--especially for staffstaff
Given demands on members’ time, one page works bestGiven demands on members’ time, one page works best
Websites and electronic access--have been a real boon to communication Websites and electronic access--have been a real boon to communication and getting timely informationand getting timely information
Direct help to analysts at congressional support agencies (e.g., CBO, CRS) is Direct help to analysts at congressional support agencies (e.g., CBO, CRS) is a big indirect help to the Congressa big indirect help to the Congress
Stochastic analysis has become the standard on the Hill.Stochastic analysis has become the standard on the Hill.
CBO and the 2002 farm billCBO and the 2002 farm bill
CBO analysts were extremely dedicated in their service to the CBO analysts were extremely dedicated in their service to the Congress during the course of the 2002 Farm Bill debate—Congress during the course of the 2002 Farm Bill debate—working many late nights and long weekends.working many late nights and long weekends. Over a roughly 16-month period, the CBO Ag Team (and other CBO Over a roughly 16-month period, the CBO Ag Team (and other CBO
analysts) provided Members and staff an almost continuous stream analysts) provided Members and staff an almost continuous stream of well over 500 informal and formal costs estimates.of well over 500 informal and formal costs estimates.
Many proposals were difficult to score—e.g. updating base acres Many proposals were difficult to score—e.g. updating base acres and/or yields, rebalancing loan rates, the new Conservation and/or yields, rebalancing loan rates, the new Conservation Security Program.Security Program.
CBO’s adoption of “stochastic scoring” for the 1996 farm provides CBO’s adoption of “stochastic scoring” for the 1996 farm provides better estimates but is more difficult and less transparentbetter estimates but is more difficult and less transparent
But none of us are perfect.But none of us are perfect. After the Senate passed its Farm Bill, CBO discovered a simple After the Senate passed its Farm Bill, CBO discovered a simple
error that caused the score to be underestimated by $6.1 billion. error that caused the score to be underestimated by $6.1 billion. They had used an 85% factor for commodity program payments They had used an 85% factor for commodity program payments
(as in the House bill) rather than the 100% factor of the Senate bill.(as in the House bill) rather than the 100% factor of the Senate bill. The revised score was $79.6 billion—well above the available The revised score was $79.6 billion—well above the available
additional funding (and the original score) of $73.5 billion.additional funding (and the original score) of $73.5 billion.
CBO and the 2002 farm billCBO and the 2002 farm bill(Continued)(Continued)
One take (of many) on the $6 billion glitch: The Farm Bill One take (of many) on the $6 billion glitch: The Farm Bill Conference:Conference: Rep. Chambliss: “But I would remind the Senator we had the option of Rep. Chambliss: “But I would remind the Senator we had the option of
telling the Senate you are $6 billion over budget. Go back and redo your telling the Senate you are $6 billion over budget. Go back and redo your bill and come back to us, but we did not do that. . . .”bill and come back to us, but we did not do that. . . .”
Senator Conrad: “Can I just say to the gentleman that it is absolutely Senator Conrad: “Can I just say to the gentleman that it is absolutely true, because of the CBO mistake—again, it was not anybody’s fault, but true, because of the CBO mistake—again, it was not anybody’s fault, but they made a mistake, and they misestimated our bill. But once we went they made a mistake, and they misestimated our bill. But once we went back to an 85-percent payment base, that took care of the problem. . . . back to an 85-percent payment base, that took care of the problem. . . .
CBO’s alternative estimate at the end of the debate was CBO’s alternative estimate at the end of the debate was controversial. controversial. In response to requests from several high-ranking Senate and House In response to requests from several high-ranking Senate and House
members, CBO provided an informal cost estimate of the farm bill based members, CBO provided an informal cost estimate of the farm bill based on March, 2002 market conditions--rather than the April, 2001 market on March, 2002 market conditions--rather than the April, 2001 market conditions on which the official farm bill score was based. conditions on which the official farm bill score was based.
The new estimate showed an estimated ten-year cost of $82.8 billion--up The new estimate showed an estimated ten-year cost of $82.8 billion--up from $73.5 billion. from $73.5 billion.
The release of this estimate after the House--but before the Senate– The release of this estimate after the House--but before the Senate– passed the final farm bill was controversial. passed the final farm bill was controversial.
Developing the Farm Bill in the Developing the Farm Bill in the House:House:BackgroundBackground
The 1996 farm bill authorized programs for 1996 through 2002 The 1996 farm bill authorized programs for 1996 through 2002 crops. Under a normal timeline, the farm bill process would not crops. Under a normal timeline, the farm bill process would not have started until early 2002. have started until early 2002.
The process for the 2002 farm bill started in the House in early The process for the 2002 farm bill started in the House in early 2000, as it was clear that the fixed payment programs of the 2000, as it was clear that the fixed payment programs of the 1996 farm bill were inadequate to address income problems 1996 farm bill were inadequate to address income problems caused by low prices.caused by low prices.
At every step--through passage by the House of the House farm At every step--through passage by the House of the House farm bill-- “knowledgeable” observers questioned the ability of House bill-- “knowledgeable” observers questioned the ability of House Ag Committee leaders to meet self-imposed deadlines. The Ag Committee leaders to meet self-imposed deadlines. The observers were wrong.observers were wrong.
Phase 1: Committee Hearings and ResearchPhase 1: Committee Hearings and Research March 6, 2000 to July 19, 2001March 6, 2000 to July 19, 2001
Committee staff analyzed alternative policies and prepared option Committee staff analyzed alternative policies and prepared option papers for Member discussions.papers for Member discussions. Long repetitive internal staff debates on alternatives.Long repetitive internal staff debates on alternatives. Revenue vs. price-based counter-cyclical payments, flexible fallow, Revenue vs. price-based counter-cyclical payments, flexible fallow,
rebalancing loan rates, etc. rebalancing loan rates, etc.
47 Committee Hearings and 1 Public Forum were held in 47 Committee Hearings and 1 Public Forum were held in Washington and around the countryWashington and around the country Testimony from 368 witnessesTestimony from 368 witnesses Requirement (during the last round of hearings) that any farm, Requirement (during the last round of hearings) that any farm,
commodity, or other group wishing to testify provide a detailed policy commodity, or other group wishing to testify provide a detailed policy proposal that includedproposal that included
The estimated government costThe estimated government cost The impact on related industriesThe impact on related industries The implications for U.S. compliance with trade commitmentsThe implications for U.S. compliance with trade commitments
What Did Producers Say TheyWhat Did Producers Say TheyWanted In a New Farm Bill?Wanted In a New Farm Bill?
Most of the 368 witnesses:Most of the 368 witnesses: Liked many aspects of current farm programs--especially planting Liked many aspects of current farm programs--especially planting
flexibility.flexibility. Wanted more automatic counter-cyclical payments (beyond those Wanted more automatic counter-cyclical payments (beyond those
provided by commodity loan programs)provided by commodity loan programs)
Some witnesses:Some witnesses: Wanted to update payment acres and yieldsWanted to update payment acres and yields Requested higher loan ratesRequested higher loan rates Wanted to continue fixed paymentsWanted to continue fixed payments
Lots of time (and money) was spend by groups searching for the Lots of time (and money) was spend by groups searching for the WTO Holy Grail: an automatic counter-cyclical payment program WTO Holy Grail: an automatic counter-cyclical payment program that qualified as “green box” under WTO rules. that qualified as “green box” under WTO rules.
The Estimated Costs of Commodity The Estimated Costs of Commodity Group Proposals Substantially Group Proposals Substantially
Exceeded Available FundsExceeded Available Funds
Extra Funding for FY 2001 - 2011
Extra Funds:
$79 Billion
Farm Group
Requests:
$261 Billion
0
50
100
150
200
250
300
350
$ B
illion
Phase 2: The Ag Committee’s Farm Bill Phase 2: The Ag Committee’s Farm Bill July 12 to July 27, 2001July 12 to July 27, 2001
Committee released draft concept paper outlining commodity program Committee released draft concept paper outlining commodity program provisions on July 12, 2001:provisions on July 12, 2001: Retain planting flexibility provisionsRetain planting flexibility provisions Retain fixed payments and add price-based, counter-cyclical payments Retain fixed payments and add price-based, counter-cyclical payments Rebalance loan rates by reducing oilseed loan rates. Add Oilseed fixed and Rebalance loan rates by reducing oilseed loan rates. Add Oilseed fixed and
counter-cyclical paymentscounter-cyclical payments Update base acres but not yieldsUpdate base acres but not yields Buyout peanut quotas. Create new peanut program with marketing loans, Buyout peanut quotas. Create new peanut program with marketing loans,
fixed payments and counter-cyclical payments.fixed payments and counter-cyclical payments.
Additional round of hearings with farm groups. Additional round of hearings with farm groups. USDA declines to testify.USDA declines to testify. Generally positive response but most want higher support for their crop.Generally positive response but most want higher support for their crop.
Committee mark-up on July 26 and July 27, 2001Committee mark-up on July 26 and July 27, 2001 Fastest mark-up everFastest mark-up ever Considered over 70 amendments, motions, and report languageConsidered over 70 amendments, motions, and report language Passed out of committee by unanimous voice votePassed out of committee by unanimous voice vote
Phase 3: Floor Debate and House Passage Phase 3: Floor Debate and House Passage July 28 to October 5, 2001July 28 to October 5, 2001
Members and Staff prepared Chairman’s Mark to take to the house Members and Staff prepared Chairman’s Mark to take to the house floor. floor.
September 11 delayed the floor debate.September 11 delayed the floor debate.
H.R. 2646 was on the House floor for three days: October 3 - 5, H.R. 2646 was on the House floor for three days: October 3 - 5, 2001: 2001: The full House considered over 40 amendmentsThe full House considered over 40 amendments Biggest controversy was the Kind Amendment that would have shifted Biggest controversy was the Kind Amendment that would have shifted
a large amount of funding from Commodity programs to Conservation a large amount of funding from Commodity programs to Conservation programs. It failed by vote of 200 for, 226 against. programs. It failed by vote of 200 for, 226 against.
H.R. 2646 passed on October 5, 2002H.R. 2646 passed on October 5, 2002 Agreed to by vote of: 291 for, 120 against.Agreed to by vote of: 291 for, 120 against.
Phase 4: Wait on Senate Phase 4: Wait on Senate October 5, 2001 - February 13, 2002October 5, 2001 - February 13, 2002
Phase 5: Conference & Final PassagePhase 5: Conference & Final PassageFebruary 28, 2002 to May 1, 2002February 28, 2002 to May 1, 2002
Pages to reconcile:Pages to reconcile: House: 379House: 379 Senate: 1,335Senate: 1,335 Final Bill: 406Final Bill: 406
Conferees:Conferees: House: 14House: 14 Senate: 7Senate: 7 Other Committees Involved: 9 (for specific titles only)Other Committees Involved: 9 (for specific titles only) Number of Non-Ag Conferees (House): 27Number of Non-Ag Conferees (House): 27
Calendar days from appointment of conferees to Conference Report filed:Calendar days from appointment of conferees to Conference Report filed: 1985 farm bill: 12 days (8 days of formal member meetings)1985 farm bill: 12 days (8 days of formal member meetings) 1990 farm bill: 33 days (9 days of formal member meetings)1990 farm bill: 33 days (9 days of formal member meetings) 1996 farm bill: 11 days (2 days of formal member meetings)1996 farm bill: 11 days (2 days of formal member meetings) 2001 crop insurance bill: 55 days (1 day of formal member meetings)2001 crop insurance bill: 55 days (1 day of formal member meetings) 2002 farm bill: 63 days (9 days of formal member meetings)2002 farm bill: 63 days (9 days of formal member meetings)
Funding Allocation Across Program Areas. House, more to Commodities.Funding Allocation Across Program Areas. House, more to Commodities.
Funding Across Time. Senate, front-loaded.Funding Across Time. Senate, front-loaded.
Commodity Program IssuesCommodity Program Issues Loan Rate Levels. House Lower.Loan Rate Levels. House Lower. Target price levels. House Higher.Target price levels. House Higher. Levels and Pattern of Fixed payment rates. House fixed all years; Senate Levels and Pattern of Fixed payment rates. House fixed all years; Senate
declining. e.g., Corn: 2002-03: $0.27; 2004-05: $0.135; 2006: $0.068declining. e.g., Corn: 2002-03: $0.27; 2004-05: $0.135; 2006: $0.068 Acre and Yield Updates & Adjustments. House, acres only. Senate both.Acre and Yield Updates & Adjustments. House, acres only. Senate both. Payment limits. House higherPayment limits. House higher Land eligibility restrictions. House similar to current law. Senate tighter.Land eligibility restrictions. House similar to current law. Senate tighter. Dairy payments. Senate include. Dairy payments. Senate include.
Concerns: Concerns: Getting bill done to guarantee that additional funding would not be lost.Getting bill done to guarantee that additional funding would not be lost. Meeting WTO ObligationsMeeting WTO Obligations
Conference Results and Final Passage Conference Results and Final Passage
Conference report filed on May 1, 2002--63 days after conferees were Conference report filed on May 1, 2002--63 days after conferees were appointed.appointed.
Neither side got everything they wanted. Compromises include:Neither side got everything they wanted. Compromises include: Funding allocation generally between two bills.Funding allocation generally between two bills. No funding front-load.No funding front-load. Commodity Program IssuesCommodity Program Issues
Higher loan rates and lower target prices in first two years, then loan rates lowered Higher loan rates and lower target prices in first two years, then loan rates lowered and target prices raised. Constant fixed paymentsand target prices raised. Constant fixed payments
Acre & Yield updatesAcre & Yield updates Payment limits-Maintain much of current law structure. Defined payment limits Payment limits-Maintain much of current law structure. Defined payment limits
somewhat lower.somewhat lower. Land eligibility restrictions--similar to current law. Land eligibility restrictions--similar to current law. Conservation Security Act. Included with reduced benefits.Conservation Security Act. Included with reduced benefits. Dairy Payments. National with limits.Dairy Payments. National with limits.
Expected to meet WTO obligations in almost all years without program Expected to meet WTO obligations in almost all years without program adjustments. WTO “circuit breaker” if needed.adjustments. WTO “circuit breaker” if needed.
House Final Passage: May 2,2002House Final Passage: May 2,2002 Senate Final Passage: May 8, 2002Senate Final Passage: May 8, 2002
The President signs P.L. 107-171, The President signs P.L. 107-171, “The Farm Security and Rural Investment“The Farm Security and Rural Investment
Act of 2002” on May 13, 2002Act of 2002” on May 13, 2002
Happy Campers Happy Campers
The Estimated Costs of Commodity Group ProposalsThe Estimated Costs of Commodity Group ProposalsSubstantially Exceeded Additional Funds Made Substantially Exceeded Additional Funds Made
Available for the 2002 Farm Bill (and Other Available for the 2002 Farm Bill (and Other Assistance)Assistance)
