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How the Sequester Affects Agriculture

Thanks to the National Sustainable Agriculture Coalition for helping us understand sequestration’s impact on food and agriculture:

Originally Published by NSAC on March 1st, 2013

Yesterday, the Senate voted 51-49 on the Mikulski-Murray-Reid bill to replace the across-the-board automatic budget cuts (sequestration) of $85 billion for the current year, and reduce the deficit by $110 billion.  The measure failed because under Senate filibuster rules, a simple majority is not sufficient and a 60-vote super majority is needed to pass most bills.  The bill included:

A Republican alternative to the Mikulski-Murray-Reid bill failed by a vote of 38-62.  The Republican proposal would have kept sequestration in place but provided greater flexibility to the Administration to determine what to cut and by how much.

Sequestration now goes into effect by the end of the day today.  According to the Congressional Budget Office, sequestration will reduce GDP growth by 0.6 percent during this calendar year and will result in a net loss of 750,000 jobs.  Sequestration will require cuts of about 12 percent in the remaining seven months of the fiscal year on all discretionary programs.  Those cuts come on top of the roughly eight percent cut for this year’s discretionary spending that Congress approved in 2011 as part of the Budget Control Act.

If Congress does not revisit the issue, sequestration will remain in effect for the next nine years.  Congress, however, could come back at any time to either eliminate the across-the-board cuts or modify them in any number of ways.

The Triple-Headed Budget Monster Revisited

In the three-step process proposed by House Republicans earlier this year that subsequently became enacted, this March 1 date was the first fiscal crisis date to be reckoned with.  The second is March 27, the day the “continuing resolution” runs out and must be replaced or extended to avoid a government shutdown beginning the very next day.

It had long been thought that the late March date was the more likely of the first two to force a comprehensive budget deal.  Those hopes have now been dashed, with the President and Democratic leaders in Congress indicating that they will not try to force a bigger deal at that time.  They will simply concentrate on the difficult job of reaching an agreement on how to factor the sequester cuts into the funding bill for the rest of 2013.

That leaves the third fiscal crisis date — May 18 — as the last remaining time to reach a comprehensive deal.  That is the date by which the debt ceiling deal from earlier this year expires.  In the lead-up to that date, the House and Senate will be busy passing their respective budget resolutions, both of which are expected to put more comprehensive — but wildly different — deals on the table.  Those budget resolutions are not likely to be vehicles from which Congress could reach a deal, but rather statements of the Senate Democratic and House Republican starting points.  Whether the budget process or the political fallout from sequestration going into effect will yield a debt ceiling-triggered deal in May or June very much remains to be seen.

So, what happens next for agriculture?

Farm Bill: The sequester will reduce farm bill spending by over $6 billion over the coming years, with the largest amount of cuts from commodity programs and the second largest from conservation programs.  Both food stamps and crop insurance are exempt, the former by statute and the latter by administrative decision.

It is highly likely that a new five-year farm bill will cut farm bill spending by significantly more than the sequester amount.  If and when that happens, the new larger cuts could be written to replace the sequester cuts or to simply add to them.

It seems highly unlikely that any significant action on a new farm bill could happen before the May budget and debt ceiling battle comes to some kind of conclusion.  At this point in time, there is still no indication that the House leadership has any intention of bringing a farm bill to the floor this year.  (The farm bill process stopped last year when the House leadership failed to bring the House Committee-passed bill to the floor.)

(Note – Today the Congressional Budget Office provided new estimates for what the Senate-passed and House Committee-passed farm bills from last year would cost if re-enacted this year.  In both cases, the amount of funding saved would decrease substantially.)

If a comprehensive budget deal were reached in May or later, and if it included clear instructions for the size of farm bill spending cuts, that might in fact be the best hope for getting a new farm bill deal this year.

Agriculture Appropriations:  The House Appropriations Committee and the full House will next week take up a continuing resolution to fund the government for the last six months of the current fiscal year.  The bill will include the sequestration cuts, which for this year’s discretionary spending total $69 billion.  House Chairman Hal Rogers (R-KY) intends to bring forward a second continuing resolution to fund all of the federal government for the rest of fiscal year 2013, with some major revisions to defense spending but more across-the-board cuts on the domestic spending side of the budget.  We will report on all the details for food and agriculture next week, once the bill becomes public.

In a bit of a partisan oddity, there appears to be more, though not uniform, interest within the House majority and Senate minority to simply allow the across-the-board cuts to be reflected in the continuing resolution, but provide some flexibility to the Administration to make adjustments.  The Senate majority and House minority, on the other hand, in general seems more interested in writing regular appropriations bills that reflect congressional spending choices, within the new much lower limits, rather than Administration spending choices.

Earlier today, USDA Secretary Tom Vilsack illustrated the impact of these coming cuts for the rest of this fiscal year.  Among the examples he provided in a speech to the Commodity Classic were:

  • a $35 million decline in farm loans, the biggest slice of which go to beginning farmers to help them get started in agriculture;
  • a decline in conservation technical assistance that will result in 2,600 fewer farmers getting conservation plans;
  • a $60 million cut in agricultural research;
  • a cut to rural housing programs that will result in 10,000 low-income rural people losing rental assistance; and
  • a reduction in the WIC feeding program that could ultimately affect 600,000 women and infants.

Two things seem clear about sequestration and the overall budget situation.  It cannot continue on the path that it is now on without huge damage to economic growth, public investment, and social services.  There is also no clear path out of the mess given the current state of politics in the country and in Washington, D.C.   We will continue to track the implications for food and agriculture policy and spending, and keep readers appraised.
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