How Soon I Forget--Debt Ceiling

 Discussing the debt ceiling issue this morning I had completely forgotten that prior negotiations had included a "temporary suspension" of the ceiling in order to have more time to negotiate.

USDA Budget Baseline

 I found this table in the CRS report on farm bill basics interesting: 

What jumps out is the huge increase in the baseline for nutrition programs. 

Budget -Wise We're Better Off?

 Congressional Budget Office does estimates of the effects of laws and proposed laws on the economy. Such estimates get media play.  What doesn't get media play is corrections:

In its March 2020 projections for fiscal year 2021, CBO underestimated revenues by 15 percent and overestimated outlays by 4 percent. CBO’s projection of the federal budget deficit in 2021 was more than the actual amount by 3.9 percent of GDP.

Trump Budget Proposal

From here:

 The Budget supports the Secretary’s efforts to reorganize Agency functions to improve the customer and consumer experience. Under the new structure, the Farm Service Agency, Risk Management Agency, and the Natural Resources Conservation Service would be merged under the Under Secretary for Farm Production and Conservation. In addition, the Secretary has established an Under Secretary of Trade and Foreign Agricultural Affairs to sharpen USDA’s focus on increasing agriculture exports to foreign markets. The Budget also supports consolidating fair practices, standards work, and commodity procurement within the Agricultural Marketing Service. These, and other related reorganizations, are expected to improve the way USDA delivers its services. In addition, the Budget supports the creation of a business innovation center in each mission area that would handle support activities in order to avoid duplicative functions and maximize collaboration between agencies.
Improves Customer Service. Modernizing program delivery and improving customer service at USDA is an important focus of the Administration. USDA is partnering with the White House Office of American Innovation to modernize its systems undertaking four key strategies: strengthening strategic IT governance; consolidating end-user services and data centers; enabling a strategic approach to data management and introducing data-driven capabilities; and improving the USDA customer experience. The Budget supports these efforts to improve service delivery by requesting funds to develop a centralized customer service portal for customers served by the Department’s three service center agencies. This single, integrated, producer-centric web portal would provide expanded and more effective and efficient access to useful online USDA services to meet the needs of agricultural producers. By optimizing service delivery, USDA can support agricultural producers to reach their productive potential and advance the U.S. economy

The Budget proposes to optimize and improve crop insurance and commodity programs in a way that maintains a strong safety net. The Budget does this while also achieving savings, eliminating subsidies to higher income farmers, and reducing overly generous crop insurance premium subsidies to farmers and payments made to private sector insurance companies. The Budget includes a bold set of proposals, including those that would reduce the average premium subsidy for crop insurance from 62 percent to 48 percent and limit commodity, conservation, and crop insurance subsidies to those producers that have an Adjusted Gross Income of $500,000 or less. In addition, the Budget proposes reductions to overly generous subsidies provided to participating insurance companies by capping underwriting gains at 12 percent, which would ensure that the companies receive a reasonable rate of return given the risks associated with their participation in the crop insurance program. The Budget proposes to eliminate an unnecessary and separate payment limit for peanut producers and limit eligibility for commodity subsidies to one manager per farm.

Cut My COLA?

If I understand the Trump budget, he would decrease the COLA's (cost of living adjustment) for those in the Civil Service Retirement System (like me) by .5 percent each time.

I can handle that, though I'd rather see a graduated decrease: say .1 for those with smaller annuities, 1.0 for those with larger ones.

Is Perdue on Board With Trump Budget?

The answer, it appears, is "no", according to this piece on his testimony today to the House appropriations.

Trump Budget for USDA

Tim Mandell at the Rural Blog copies the gist of Chris Clayton's early analysis of the Trump budget--big cuts, including  payment limitations on crop insurance and farm programs.  USDA takes a 20.5 percent cut in discretionary, the biggest of any agency except State.

Dead on arrival and already starting to smell.

A Billion Is a Token Amount

So says the greenies, the National Sustainable AGriculture Coalition commenting on the Republican budget (from agriculture.com)

“While we continue to oppose re-opening the farm bill, we are thankful the draft House budget resolution released today is asking for farm bill cuts of only $1 billion …over the next decade, though it raises the rather obvious question of why bother to go through an agonizing re-opening the farm bill via the budget reconciliation process for such a token amount."

Sen. Ev Dirksen had the famous quote about "a billion here, a billion there, pretty soon you've got real money. Back then the federal budget was a bit over 100 billion, not the 3-4 trillion of today.

Defeat of Farm Bill

Keith Good at Agfax writes about the defeat of the farm bill, including some interesting discussion from Craig Jagger, who blames the defeat in part on the changes in Congressional rules.   I liked this:

Furthermore, the BGov Study stated that, “In addition, explicit timing shifts were used to capture ‘savings’ of $2.6 billion over 10 years for the 2002 farm bill and $4.5 billion over 10 years for the 2008 farm bill. Timing shifts move costs outside the 10-year budget window. The CBO scores savings for the shifts even though only the timing, not the amount, of program costs change. Those explicit timing shifts are not available for the 2013 farm bill, because all that could be identified have been used and each timing shift can be used only once…When major program changes are being made, having extra money to make them more palatable to those losing benefits makes writing legislation easier. This farm bill process undoubtedly has been more contentious and difficult from not having extra money above its baseline that recent farm bills had. Now to add funding for a new program or to increase funding for an existing program, funding for a different Agriculture Committee program that has a baseline needs to be cut, robbing Peter to pay Paul.”

Bottomline: the Ag committee had run out of tricks to ease the pain.

Sustainable Ag on Sequestration

I've a lot of respect for the work Sustainable Ag does in tracking Congress and the administration.  Here they discuss the impact of sequestration on farm programs.  The headline is that crop insurance is defined as a prior legal obligation and therefore not subject to sequestration. 

FSA and CCC: the Magic Numbers

Are 8.2 and 7.6.

What does that mean? Based on a very fast skim of the OMB report on sequestration, FSA would take an 8.2 percent hit to its administrative funds, and CCC would take a 7.6 percent hit to part of its funds. I don't understand the CCC calculation but the cut amounts to $469 million, with a good portion of the $19,175 billion either exempt or offset.

[Update: Appendix B has a breakdown of sequestrable versus exempt.  Unfortunately I can't copy the text, but something called the "Discrimination Claim Settlement" is sequestrable.  Is that Pigford, or the women and Hispanic?]

The GRH Zombie Rises from the Dead?

Reading the Congressional Research Service report on sequestration it seems to me that Gramm-Rudman-Hollings is starting to stir.  (GRH for the whippersnappers in the audience was the attempt in 1985 to fix federal budget deficits, by applying a flat percentage reduction to federal expenditures if certain conditions weren't met.  In 1986 we reduced deficiency payments by a factor (I think 4.6 percent) under GRH.  The result, when combined with the System 36 automation and the new farm bill, was total disaster administratively.  That was partially my fault because of the way we ended up applying payment limitation, and partially fiscals because we didn't have the coding and entries for refunds in place.) 

I wish FSA well if they have to apply sequestration in the new year.

Raising the Debt Limit: What Happens to Plain Folks?

When the Dems and Reps get into a fight over raising the debt limit, as they did last year and look to be heading for this year, what happens to the plain folks?

According to this extension post, at least one soldier got confused by the games.

Budget Baselines

Via EWG, here's the Congressional Research Service's discussion of the budget baseline for the next farm bill.  It shows a baseline of $90 billion over the next 10 years for crop insurance, including roughly $1.3/4 billion in delivery expenses.  Interestingly, the administrative expenses for NRCS and FSA aren't included in the discussion.

Charles Peters, NASS, and Bureaucratic Maneuvers

Charles Peters, the founder of the Washington Monthly, is a sometimes cynical viewer of the Washington merry-go-round (to mix up journalistic references).  He observed that whenever there was a battle over appropriations and budget cutting, the smart bureaucrats would, if they were in the National Park Service, plan to close the Washington Monument.  In other words, they'd threaten visible cuts of things near and dear to the appropriators, or at least the appropriators constituents. 

I think a hat tip is due to the bureaucrats at NASS, who may well have executed a classic closing-the-monument move.  With due credit to Chris Clayton, at DTN Progressive Farmer, he narrates:

Last week the New York Times had a good feature on the cutting of National Agricultural Statistics Service reports ranging from counting goats and catfish to minks, beer hops and bee keeping.

http://www.nytimes.com/…

It was good timing, as the House and Senate appropriators met to hammer out differences in budgets. Appropriators opted to spend $6-9 million more on NASS than the two committees had individually budgeted, as an agricultural economics firm highlighted Tuesday.

Appropriators wrote in their conference report,

"While it is imperative for all of USDA's agencies and offices to prepare to address potential reductions in funding, the conferees are concerned that the agency made this announcement before the final appropriation was determined."

In other words, You guys made us give you more money because we didn't want to hear from the catfish guys that you are neglecting to count them."

Appropriators asked NASS to reconsider its decisions about cutting the reports and reinstate as many as possible.

Ron Paul and the Farm Programs

Ron Paul released his budget outline, calling for a trillion dollars in cuts.  Looking at the details, Rep. Paul either proposes to continue farm programs unchanged, or considers them so unimportant as to ignore them.  For USDA he eliminates Food for Peace, FAS, WIC,  and research and education, and whacks food stamps. But no mention of FSA/CCC/NRCS.

Front Page of the Times

That's where an article on the proposed replacement of the direct payments program with something like ARRM finds a home. One knows the article won't be favorable to farm programs, even though it begins thus:

It seems a rare act of civic sacrifice: in the name of deficit reduction, lawmakers from both parties are calling for the end of a longstanding agricultural subsidy that puts about $5 billion a year in the pockets of their farmer constituents. Even major farm groups are accepting the move, saying that with farmers poised to reap bumper profits, they must do their part.

The author focuses on the Thune-Brown bill and opposition from EWG. 

A Question of Taxes

From Illinois farmdocdaily, comes this observation, based on their surveys of farmer's accounts, comparing 2001-5 with 2006-10:

It would seem that to add over $100,000 in net farm income while adding just under $6,000 in income and social security taxes doesn’t quite add up! We know that tax rates…even at their lowest…are not at the 6% level. What gives?

 The writer goes on to offer some possibilities, some of which amount to farmers deferring tax liabilities down the road, and warns of a possible day of reckoning (my words, not his). 

I hate to be cynical about the hardworking people in American's heartland, the truest of all Americans, but it might just be that one or two of the farmers is indulging in that oldest of American pastimes, the pursuit of which led directly to our Revolution: fudging on one's taxes.

I'm sure no one in Congress is going to suggest adding one or two auditors to the IRS as a partial fix to the budget.

(To be fair, I should note my understanding of federal tax laws as they apply to farmers is very close to zero.)

One question: if farmers have to pay self-employed SS taxes of 13.3 percent on income less than $102K, shouldn't one expect to see more than $19000 social security and income taxes paid on over $200,000 income? What are the limits to deferring income?

Slashing Crop Insurance?

Here's  a quote from Farm Policy, which I could duplicate from other pieces of propaganda information put out by the friends of crop insurance.

The article noted that, “Federal lawmakers have slashed more than $12 billion from crop insurance programs since 2008, [Moran] said, noting that subsidized crop insurance is important in a state that this year was ravaged by everything from flooding to drought.

  In the interest of fairness I should point out that a "slash" is not always a "slash".  Suppose the direct payment program is cut by $1 billion, or conservation programs are cut by the same amount--those could be called "slashes".  But those slashes are not the same as the slashes of crop insurance.

Why? Because those programs are fixed amounts, and a cut to them is by a fixed amount.  But crop insurance is an entitlement, so the government's budgetary exposure is not constant.  The exposure goes up and down (mostly up recently) according to program participation and crop prices.  So those slashes are calculated, based on the current conditions and projections, but the real spending cuts can only be determined after the fact.

The second reason is more indirect: program proponents make sure everyone is aware of "slashes" to the entitlement, but the increases in the entitlement creep in on little cats paws.  I'm not really picking on crop insurance; the identical logic and political posturing occurs among proponents of food stamps.

Debt Ceiling Deal

For those who may not have followed it, the deal doesn't force any cuts in the current direct payment program (unlike Sen. Reid's version of last week) nor does it hit federal employees or retirees right now.