Cutting Direct Payments

It's always interesting to a born bureaucrat to see how lawyers will implement policy proposals.  We're getting an indication of how reductions in direct payments might be made from today's Farm Policy: changing the definition of "payment acres" for 2011.  Specifically:

(3) by adding at the end the following: ‘‘(C) in the case of direct payments for the 2012 crop year, 59 percent of the base acres for the covered commodity on a farm on which direct payments are made.’’.

My reaction: should be easy to implement, which is the prime consideration for a bureaucrat.

End of Farm Programs, End of Workload

Farm Policy quotes extensively from a Wall Street Journal piece on farm programs (behind pay wall), including this bit of interest:

The Journal article also noted that, “Meanwhile, workers in the USDA’s county offices, seeing the handwriting on the wall, are campaigning for new things to do, now that there aren’t any price-support payments to dispense. One idea is to give them responsibility for federally subsidized crop insurance, currently handled by private companies. Because crop values are higher, the amount the federal government spends annually on crop insurance is forecast to climb above $7 billion by 2013, up 60% from last year.”

 NASCOE is getting ready for its convention, with the President raising issues, including whether to try to protect as many jobs as possible, given the likelihood of a 10 percent cut in staffing and plans to close more offices.

A New Farm Bill, Deficits and the Bureaucracy

Farm Policy yesterday has extensive discussion of the next farm bill.  There are so many balls in the air right now it's (even more) difficult to write intelligently than usual.  From the bureaucracy's perspective it appears the bottom line is: it will be an interesting time, as in the Chinese curse. Working in FSA in Washington, or in Kansas City when a farm bill is being written and implemented is always fun. 

I think from a bureaucrat's view there are two separate timelines:

1. The first relates to the debt ceiling/deficit reduction. The Agriculture committees have been asking that they be given the authority to figure out where to cut; essentially saying tell us to cut $15 billion but don't specify where, we'll do.  That's essentially a form of the budget reconciliation bill which Congress has been using for 30 years so or, except that the cuts this time around likely will be deeper. (See this oldish Sustainable Agriculture post.) So I assume either by August, or by later this year, FSA will get changes needed for the 2012 crop year to save money.  Presumably those changes won't be too hard to implement, in that they'll cut rates or programs, not create new provisions. 
2.  The second is the actual new farm bill, which I assume gets written and passed in calendar year 2012 to cover crops in 2013 and later. The question now seems to me to be whether there's going to be a set of constaints on the Ag committees and how constrictive they are.  If I understand, the Biden group's proposal likely would require cutting $3 billion a year.  The McConnell/Reid proposal essentially punts the amounts of cuts for agriculture to a separate group.  If I'm an FSA bureaucrat, I'm hoping the cuts get set in stone sooner rather than later. Going with a separate group of legislators to figure out cuts means delay, which gives the Ag committees less time to do their work.  I suspect the bureaucrats and the Ag committees have separate incentives: bureaucrats want things settled as soon as possible, committees want as much flexibility as possible, which they probably get if things get punted down the road.

Given all the balls in the air, FSA might see a high proportion of people who are eligible actually deciding to retire.

If the Worst Happens

Zachary Goldfarb has a piece in the Post discussing the complexities the Treasury will face if there's no debt ceiling deal by August 2. While, as Republicans delight in saying, there's enough tax money coming in to handle the interest on the national debt and some other stuff, the decision making rapidly gets tricky.  (There's a chart in print paper I don't see online, but the Post does have a separate "game" where you can figure out which bills you pay and which you don't.)  The complexity comes in when you move past the neat tables of expenses for various items and look at the day to day receipts and payables coming due. 

For example, one day in:

On Aug. 3, the Treasury is set to receive about $12 billion in tax revenue — mainly from people paying their taxes late — and is slated to spend $32 billion, including sending out more than 25 million Social Security and disability checks at a cost of $23 billion, according to Powell’s analysis.
Obama could decide to pay half of the Social Security checks and ignore other bills coming due that day, which include $500 million in federal salaries and $1.4 billion in payments to defense contractors.

We really don't want to go there.

Cantor and Ag

Ezra Klein has the slides Rep. Cantor used in his caucus to explain the different proposals.  He's showing $33 billion cut in ag subsidies as the status of the Biden negotiations. If the ag subsidies are $20 billion a year, that's about a 16 percent cut.

Budget Savings from Cutting Direct Payments

Chris Clayton reports on a study by FAPRI:

"If direct payments are eliminated and there isn't a rush to ACRE, there would be a 10-year budget savings of about $41.7 billion from FY 2012 to 2012.

Yet, if everyone jumped into the ACRE program, assuming it stayed as is, then the budget savings over 10 years would likely fall to about $18.9 billion, FAPRI stated.

House Ag Appropriations Action

While the Sustainable Agriculture Coalition often takes positions with which I have some problems, they seem almost always to do a good and detailed job of summarizing what's happening on the Hill.  Rather than resummarize what happened when the House passed the ag appropriations bill, see their summary. 

Just two things I'd mention: one is the obvious--this vote means little, the real action will be how the conference committee reconciles House and Senate bills (assuming there ever is one) particularly the paying Brazil $147 million for cotton program bit).  The other is the fact that the USDA building and facilities fund was raided for other purposes.  No one worries about how the bureaucrats are housed.

If You Can't Do It, Change the Rules

Via Farm Policy, here's an article on the possibility of going to 2-year budgets.  It's probably a good idea, but it reflects Congressional failure to pass budgets under the current system.  And the current system reflected Congressional failure to pass budgets under the prior system  And the prior system reflected Congressional failure to take a comprehensive view of expenditures and income.  It's called moving the goalposts.

Payment Limitation Progressing

Chris Clayton reports the House Appropriations committee approved an amendment by Rep. Flake setting a $250,000 payment limitation on certain farm programs.

Tidbits from the committee report:



Cultural Transformation.—USDA is carrying out initiatives such as cultural transformation without a budget request or a specific appropriation for this activity. One of the concerns is the way in which this initiative is spending scarce Federal resources. According to USDA documents, the Department spent $50,000 to train
900 senior leaders on cultural transformation. This appears to be a legitimate expense; however, USDA spent nearly $500,000 on personnel and travel to send 43 employees to one of the most expensive business schools on the East Coast for a week of training. This does not appear to be a wise expenditure of Federal dollars. Furthermore, the Committee does not believe that holding cultural transformation activities on the National Mall is a wise expenditure of funds either. Lastly, the Department has not defined what cultural transformation is, what requirement is attempting to be met, what the goals are, and what measurements are being used in order to determine its effectiveness




State Office Collocation.—The Committee continues to direct that any reallocation of resources related to the collocation of state offices scheduled for 2011 and subsequent years is subject to the Committee’s reprogramming procedures.


FSA IT.—The Committee does not approve reprogramming the $23,600,000 from MIDAS. In providing the fiscal year 2011 funding level, the Committee expected that $49,500,000 would be spent on MIDAS in 2011. The Committee has acknowledged the tenuous stability of the system and directs the agency to provide a briefing to the Committee by June 10, 2011, on this issue.

CCC Funds to FSA.—The Committee has learned that, through the Commodity Credit Corporation, an additional $20 million has been made available to the agency. The Committee directs the agency to report by July 1, 2011, on its plans for the use of those funds.

John Holbo Reverses Things

Via the Corner, a spot of TV talking head with Eric Cantor.

“Everything is on the table,” he said. “As Republicans, we’re not going to go for tax increases. I think the administration gets that. But we’ve also put everything on the table as far as cuts.”

Imagine what the response would be if this were flipped around. Imagine a Democrat emitting the following, as a bold deficit reduction plan: “Everything is on the table … we’re not going to go for spending cuts. I think the Republicans get that. But we’ve also put everything on the table as far as tax hikes.” No one would say such a Bizarro Norquist thing, of course, because no one on the Democratic side is as bizarre as Norquist. But if someone did, it would be perfectly obvious the person saying this thing wasn’t concerned with deficit reduction. The idea that someone unwilling to contemplate spending cuts – anywhere – was a deficit hawk would not pass the laugh test. As Cantor’s statement does not.

When the US Defaulted--Bureaucrats Screwed Up

In a little-known episode, the US has actually defaulted on some Treasury Bills in 1979 due apparently to a perfect storm of events, including maneuvering over the debt ceiling plus bureaucratic problems.  Quoting from Donald Marron's quote of the original article: "on an unanticipated failure of word processing equipment used to prepare check schedules."

That phrase shows how far we've come in 32 years.  I'm curious what sort of word processing equipment they were using at that time--it seems a little late to be using IBM MT/ST's but if they were merging a file of payees with the check boilerplate they would have served.  If they were using more modern equipment, the data storage might have been a problem.  Our Lexitrons used cassettes for storage, the read/write heads would get out of alignment so a cassette recorded on one machine might not work in another.  Interesting also the operation wasn't computerized--after all punch card accounting machines were the way IBM got into computers back in the 1930's.  Maybe they tried to modernize and had some problems. 

Anyhow, bottom line is the US defaulted and a study seems to show it was expensive; the Treasury had to pay higher interest rates for a good period of time.

Republican Budget for Agriculture

Here's the summary, though to be honest I don't understand it.  Some of the yellow highlighted rows appear to be totals of the rows below, as for Conservation, but not for others, as Farm Programs.  Here's the text of the bill, which I skimmed and didn't see anything I thought noteworthy.

Ad Hoc Disaster Isn't Real Money

From Farm Policy, quoting Mr. Stallman of the Farm Bureau:

“Farmers are willing to rely instead on Congress passing temporary ‘ad hoc’ disaster bills, he said. Spending on such bills typically is added to the budget deficit rather than being taken from the farm bill.

The point being is the political debate is always about authorizations (the farm bill) and appropriations (or the omnibus appropriation or the continuing resolution), never about the contents of the actual deficit.  That permits smart legislators to play games with spending, because all the pundits just assume the deficit is the result of the policies which are debated.  

How To Raise the Debt Limit

Seems to me it would be logical for the Republicans in the House to take Obama's proposed"fail-safe" and attach it to the increase of the debt limit.

Republican Study Committee Budget

Following are excerpts from the RSC budget (not Rep. Ryan's):

SUPPORT MARKET-BASED PROGRAMS BY ELIMINATING THE DIRECT PAYMENT (DP) PROGRAM.
The DP program provides cash subsidies to commodity producers, capped at $40,000 annually. The payments are based on a historical measure of a farm’s production acreage, and they do not vary based on actual production or commodity prices. Direct payments were originally established in 1996 as a transitional program. However, the subsidies have not been reduced over time.

The Washington Post estimated that between 2000 and 2006, the federal government made $1.3 billion in direct payments to people who do not even farm. Recently, the Iowa Farm Bureau proposed eliminating the DP program. While the President has called for lowering the cap in FY 2012, this plan would eliminate the Direct Payment program entirely. The savings would amount to $4 billion in FY 2012 and $50 billion over ten years. Although this non-market based program would be terminated, growers could still receive support payments from other support programs such as the Average Crop Revenue Election (ACRE) and Marketing Loan Assistance programs.

PROHIBIT NEW ENROLLMENTS IN THE CONSERVATION STEWARDSHIP PROGRAM.
The Conservation Stewardship Program (CSP) provides annual payments to producers for five years in exchange for undertaking various land improvements. However, payments under the program can be made to producers who have already undertaken conservation measures.

Beginning in FY 2012, new enrollees would be prohibited from entering into the program. This policy would result in FY 2012 savings of $35 million and approximately $10.5 billion in savings over ten years. The CBO stated that the “criteria used to determine improvements in existing conservation practices are not readily apparent, and the absence of objective measurements could result in higher payments than necessary.” The RSC’s proposed option is based on the National Commission on Fiscal Responsibility and Reform’s recommendation to put limits on this program.

PROHIBIT GENERAL ENROLLMENTS IN THE CONSERVATION RESERVE PROGRAM (CRP). The CRP was established by the 1985 Farm Bill. Its purpose is to remove land from agricultural production, and it is the federal government’s largest private land retirement program. Under the CRP, producers are paid to plant grass or trees on retired acres. Currently, approximately 31 million acres of land are enrolled in the program. The program is economically destructive and takes away farm land that could be used for things such as corn and biomass production. Beginning in FY 2012, new general enrollments in CRP would be prohibited, resulting in approximately $9 billion in savings over ten years.

REDUCE THE PREMIUM SUBSIDY IN THE CROP INSURANCE PROGRAM.
Farmers use the Federal Crop Insurance Program to protect their crops from perils by purchasing policies that are sold and serviced by private vendors. The federal government subsidizes about 60 percent of the premiums paid for this program. Beginning in FY 2012, the federal government’s subsidy would be reduced to 50 percent of the crop insurance premium. This would result in a savings of $400 million for FY 2012 and $11.8 billion over ten years. Reductions of this magnitude in the subsidy rate likely would not substantially affect the level of program participation.

ELIMINATE THE FOREIGN MARKET DEVELOPMENT PROGRAM (FMDP).
The FMDP is used by agricultural trade associations and commodity groups to help promote exports and provide nutritional and technical assistance to other countries. This program would be terminated beginning in FY 2012, resulting in FY 2012 savings of $35 million and savings of $350 million over ten years. This initiative is something that the private sector would otherwise be spending money on anyway. The private sector should be responsible for promoting its own products, as it receives the profits from the sales of these products.

ELIMINATE THE MARKET ACCESS PROGRAM (MAP).
The MAP is intended to promote overseas marketing of U.S. agricultural products. MAP funds consumer promotions, market research, trade shows, advertising campaigns, and other programs designed to subsidize the sale of brand-name products in foreign markets by private cooperatives, trade associations, and businesses. Taxpayers should not be forced to pick up the tab for this kind of corporate welfare. The National Commission on Fiscal Responsibility and Reform even targeted this program as one in need of change. This program would be terminated in FY 2012, resulting in an annual savings of $200 million and $2 billion in savings over ten years. According to the CBO, some analysts believe MAP “does not warrant additional funding because the extent to which it has developed markets or replaced private expenditures with public funds is not known.”

ELIMINATE WOOL AND MOHAIR SUBSIDIES.
The federal government first enacted price support for wool and mohair in 1947, and the National Wool Act of 1954 established direct payments for wool and mohair producers for the purpose of encouraging production of wool as an essential and strategic commodity. This support was last re-authorized in 2008 despite a complete lack of a compelling need for government support of mohair. Beginning in FY 2012, wool and mohair subsidies would be eliminated, saving taxpayers $4 million in FY 2012 and $40 million over ten years. This budget would return control over supply, demand, and price of wool and mohair to the free market.

The Return of Gramm-Rudman-Hollings Thanks to Obama

25 years ago when we were also concerned about deficits, one of the instruments was Gramm-Rudman-Hollings,which provided for automatic cuts in expenditures if deficits exceeded a pre-determined level. 

President Obama makes a return of GRH an important part of his deficit program.  See Keith Hennessey's summary [See this Yglesias post for more discussion.]

GRH is burned in my memory, given the problems it caused us to administer it. If it returns, I wish FSA luck.

Carolyn Hax on Our Budget Problems

Carolyn Hax is the Post's advice columnist. Today's column starts with a query from a two-career, two child family, where the wife is feeling a bit overwhelmed. Her advice is appropriate, not only for the question, but also for the US Congress and political system in dealing with our budget problems:

". It’s so easy to focus on the individual items that make up your life: We need to do X for the kids, we need Y amount of money, Z is necessary for my job and I need this salary, etc. That’s because they’re small, incremental decisions, often conveniently black-and-white, so making them brings a sense of progress — all while leaving the bigger, scarier, grayer issues entirely unaddressed.

 Since semi-conservative columnist Robert Samuelson is also in the paper bemoaning ":

government has promised more than it can realistically deliver and, as a result, repeatedly disappoints by providing less than people expect or jeopardizing what they already have. But government can’t easily correct its excesses, because Americans depend on it for so much that any effort to change the status arouses a firestorm of opposition that virtually ensures defeat.

[I was astonished to have Samuelson say that Rep. Ryan would "gut defense"; my impression which may be wrong is that he didn't touch defense beyond Sec. Gates' proposals.  But anyway, when we look at the big picture, as Ms Hax exhorts us to, through Ezra Klein's eyes, we find the current law will end the deficit.  (What he doesn't say is government spending increases as a percent of GDP--the point is that tax provisions on the books would raise enough, assuming the PPACA provisions are implemented.)

Rep. Paul and Rep. Dave

Thirty years ago a Republican congressman from the upper Midwest had risen to prominence through his wonkish demeanor and mastery of the ins and outs of the Federal budget. The Republican leadership of that time gave him full power over the budget, which led to major changes in the federal government.

Today another Republican congressman from the upper Midwest has risen to prominence through his wonkish demeanor and mastery of the ins and outs of the Federal budget.  The current Republican leadership (of the House, not the President this time) have given him full power over the budget.

Will Rep. Paul Ryan succeed in making major changes to the federal government?  Will he, like ex-Rep. Dave Stockman, the director of OMB, have to be "taken to the woodshed" for going off the reservation and admitting his magic asterisk was bull?

[Updated:  I should have added, both Representatives were good at getting favorable press coverage; the media loved the wonks.]

Ethical Geezers--Are We a Minority?

Lots of stuff in the blogosphere on Rep Ryan's proposals.  One thing he does is to exempt people over 55 from the effects of his change on Medicare.  That may be wise politically, but it's not right.  I prefer the approach in the original Ryan-Rivlin plan, where geezers would choose between the current plan and the new plan (supported premiums/vouchers). Best would be a plan which is phased in and which applies to everyone.  No special breaks for geezers, even though we do vote.

Ryan's View

Apparently, according to Chris Clayton, Rep. Ryan's budget plan would require a cut in farm programs by reforms in the 2012 farm bill.

In his plan, "The Path to Prosperity," Ryan stated that farmers appear to be doing well, and could manage if Congress were to "reduce the fixed payments that go to farmers irrespective of price levels." Further, agriculture needs "reform the open-ended nature of the government’s support for crop insurance."