What Future for the Farm Bill?

You may have heard by now that the US Farm Bill has spectacularly failed in the House of Representatives, making it the first time in at least 40 years that a Farm Bill was voted down in the House. The $500 billion bill was voted down with 234 to 195 votes, leaving lawmakers baffled and farmers without a plan.

The passage of the Farm Bill had already been delayed in 2012, when no bipartisan deal was struck,  leading lawmakers to extend the previous 2008 Bill until September 2013 and go back to the drawing board to come up with a more palatable deal. Well, these efforts have clearly not succeeded, since both Democrats (who were appalled by the proposed massive cuts to the food stamp program) as well as Tea Party Republicans (who argued that cuts were not going far enough) decided to vote against the Bill that was seen by many as too partisan and not conciliatory enough.

While a lot of media attention has focused on the failure to pass the bill as an ominous sign of the ability of Congress to get legislation through, I waited for a couple of days to write this post because I am mainly interested in 2 questions: a) how will farmers be affected by this latest twist of events and b) what are possible ways forward for the farm bill?

Let’s go question by question.

How will farmers (and consumers) be affected by this latest twist of events?

The good news first: the two largest budget items, the food stamp program (accounting for around 75% of the Bill’s budget) and the crop insurance program (the largest safety net provision for producers) will just continue on as present, because they are permanently authorized. They would stay in operation even if the current law is allowed to lapse, and would be funded via annual appropriations bills.

However, in the case of inaction, the rest of the policy would revert to the first and “permanent” farm bill that was passed – wait for it – in 1949. There are some quirks that are really funny if there weren’t such a real risk that they take action – for example, in 1949 the government still guaranteed a minimum milk price for producers, which would lead to a quasi-doubling of milk prices in grocery stores if the permanent bill re-entered into force. This has been dubbed the “Dairy Cliff” by observers. According to agricultural economist Chris Hurt, a reversion to this bill is however not likely, because it has “too extreme of consequences” in his view.

Yet, another agricultural economist (and my former prof!) Roman Keeney cautions farmers that the September 30th deadline is not the be-and-end all: “September 30 is not doomsday for farming and safety nets,” he said. “Expiration of the fiscal year last year wasn’t a big deal at all, and it probably wouldn’t be this year, either.” This is because a lot of the programs that were defined in the extension are implemented automatically for the full crop season, so corn and soy bean farmers for example wouldn’t feel immediate impacts of the failure of the bill.

Still, farmers want to plan ahead for the next year and this legislative uncertainty has very real impacts on their decision-making: if you are uncertain of which, if any, farm support system you will be affected by, how will you make investment decisions whether to buy new machinery, to build a new stable or to get a large loan? Plus, even if you want to follow through with your plan, banks are wary to lend to farmers that cannot assure them that they will have the financial means to pay the money back.

Even worse, livestock producers might now go a year without a disaster insurance program that can help them in the case of droughts and other weather-related events – which is a timely issue because a lot of cattle producers were affected by the continued drought conditions (over three years!). The cattle herd nationwide is at its lowest in 60 years, and producers are struggling to survive. According the National Cattlemen’s Beef Association Executive Director of Legislative Affairs Cristina Llorens, the legislative impasse is “a major defeat for cattle producers because they were counting on Congress doing something to help drought-suffering producers.”

What are possible ways forward for the farm bill?

We already discussed what would happen if lawmakers just threw up their hands and did nothing – the reversion to the underlying “permanent” farm bill of 1949, with impacts especially on the dairy sector, but in general reverting US agricultural policy to a post-war world. Obviously not the most enticing scenario.

As we said, the Congress was already before a similar impasse in 2012, when they passed the so-called “stop-gap” measure to extend the last Farm Bill until now, giving them more time to find a better compromise. According to a number of academics, observers and legislators, a second similar extension is the most likely strategy forward – it’s definitely the path of least resistance to “buy more time”. However, there is a reason that legislators have worked for years on a new farm bill – the old one had a couple of measures that need reform, and also is too expensive for this new overall budget (hence the debates about spending cuts).

Also, remember the suffering cattle farmers? Since the 2008 bill obviously didn’t foresee the droughts in 2011, 2012 and 2013, there are no applied assistance schemes in place that would aid these producers.

Additionally, the second chamber, the Democratic-run Senate, seems to oppose another stop-gap measure quite strongly: as the Senate Majority Leader Harry Reid pointed out, “I’ve spoken over the weekend to Secretary [Tom] Vilsack, the secretary of agriculture, and we agreed that maintaining the status quo is not an option. Doing nothing means no reform, no deficit reduction and no certainty for America’s 16 million farm industry workers,” Reid said. “I want everyone within the sound of my voice -– as well as my colleagues on the other side of the Capitol –- to know that the Senate will not pass another temporary farm bill extension.“

What does Mr. Reid suggest? According to him, it would be best if the House just put the bill up for vote that the Senate has already passed. This bill is pretty similar to the failed House bill, except that the cuts in the food stamp program is much more moderate (“only”  around $4 billion, as compared to $20 billion in the House bill). According to the Huffington Post analysis, “such a move would likely violate Boehner’s principle of only holding votes on bills supported by a majority of his Republican House caucus, but the legislation would probably pass with backing from nearly all Democrats and moderate Republicans.” However, Reid also indicated that the Obama administration backed his position.

A third option is to create a “mini-farm bill” which takes up the 2008 bill and just makes the most necessary changes to it – though the most necessary changes are likely also the most partisan issues, so it will be interesting to see whether legislators will be able to rally around the necessity.

Finally, there is always the option of taking the much-fought-over bill up again – potentially without the amendments that, according to some observers, pushed Democrats over the edge and led them to vote against it – and try to pass it in its ‘clean’ state.

Fiscal conservatives are suggesting to split the bill in two, thereby divorcing the historically-married issues of farm support  and food stamp programs. However, the combination of these two in one bill has until now ensured a compromise that enabled the bill to be passed in the first place, since Republicans, favoring large-scale producer support, and Democrats, which feel strongly about social support through food stamps, historically left each other their pet issues as long as their own was also included. How the conservatives expect to pass not one but two bills, taking away the compromise solution, is not clear to me.

Phew, that was quite a lot of information, right? I can sort of see why there is so much debate on it – and maybe so little agreement. Yet, I tend to agree with Agricultural Secretary Tom Vilsack who commented that it might be necessary that rural politicians communicate better the real consequences to farmers of having, or not having, a Farm Bill. He said: “”We don’t market what we do and what we mean effectively, so politicians think they can fail to pass necessary legislation and not suffer any consequence.”

And whatever you may think about the US ag lobby, the Farm Bill affects small producers as much as large ones. Thus, it’s so much more than a partisan rope-pulling game – it really affects livelihoods.

Did you follow the development – and bust – of the Farm Bill? What are your thoughts?