The Farm Bill’s Harvest: Bigger, Costlier Government

Wednesday, March 19th, 2014 and is filed under Blog, Debt, Economy

Earlier this year, we were entreated to a vivid example of how neither party is committed to shrinking the federal government and bolstering private enterprise when they passed a five-year Farm/Food Stamp bill.  CBO pegged the 10-year cost of the bill at $965 billion, up from $604 billion in 2008.  Yet, the politicians sold it as an $8 billion cut because it fell short of the notional $973 billion baseline.

Aside for the raw cost of the bill, the structural changes on the agriculture side and the lack of reforms on the food stamp side actually made the bill even worse:  At the time, we noted the following:

Moreover, any projected score on food stamp spending is meaningless.  The food stamp program is part of mandatory spending, and given the fact that this bill fails to structurally reform the program on a large scale, the 10-year cost will continue to rise as more people are encouraged to join.

On the agriculture side, this bill is an even bigger joke.  Drafters of the bill are boasting how they are abolishing $5 billion in direct subsidies. The problem is that this bill creates new subsidy programs, which will be even more expensive and market-distorting – and they will be permanent law, not subject to reauthorization.

The Agricultural Risk Coverage (ARC) would guarantee shallow loss off of record revenue farmers have been enjoying over the past few years.  The shallow loss program would kick in when revenue dips below 86% of recent year amounts  The Price Loss Coverage (PLC) would trigger subsidies when prices for certain commodities dip below target prices.  For many crops, prices are already beginning to drop towards the cusp of those trigger levels.  Hence, the cost of these programs will probably spike much higher than originally projected when CBO scored the bill with the higher prices.

Less than two months later, both predictions have come true.  With regards to food stamp spending, the lack of structural reforms is precluding the actualization of even the notional baseline savings.  Here is a report from NPR explaining why the “savings” from food stamp “reforms” never got off the ground:

The cuts were related to a program known as “heat and eat.” In the past, it had allowed the participating states to give low-income households as little as $1 a year in home heating aid so they’d qualify for more food stamps.

States said it made the program and got help to those who needed it. But the maneuver was called a loophole by both Republicans and Democrats. So last month, Congress agreed to raise the amount of utility assistance states would have to pay to trigger the provision — to more than $20 a year.

The idea was that many of the states that use “heat and eat” would decide it wasn’t worth their while. The expected result? Some 850,000 food stamp recipients would have their benefits cut an average $90 a month, which is where the savings would come in.

Turns out, Congress was wrong.

The “heat and eat” program covers 16 states, plus the District of Columbia. Six states — Pennsylvania, New York, Connecticut, Rhode Island, Oregon and Montana — have already declared that they will boost home energy benefits to avoid the food stamp cuts. Two other participants — Vermont and D.C. — are actively working to do the same thing.

With regards to the farm subsidies, Heritage Action has cited a new analysis from the University of Missouri’s Food and Agricultural Policy Research Institute confirming our worst suspicions – the new subsidy programs will cost more than the direct payments and more than CBO originally projected:

Despite the elimination of direct payments, the new farm bill is going to pay off better than the 2008 law for many growers and could be more costly to taxpayers than the Congressional Budget Office estimated, according to an analysis released Thursday that provides the first up-to-date look at the bill’s impact.

According to economists with the University of Missouri’s Food and Agricultural Policy Research Institute, the cost of the farm bill’s new Price Loss Coverage program will start at $2.1 billion for this year’s crops and increase to $3.4 billion by 2018.

CBO had estimated the PLC would cost roughly $1.6 billion to $1.7 billion a year through 2019. The CBO analysis was based off a forecast issued last year when market prices were higher. PLC will trigger payments when prices fall below fixed levels, or reference prices.

Every Republican running as a conservative this year must take notice.  This is just one example of how the GOP establishment has no intention of fighting for limited government, and to the extent that they entice rank-and-file members into supporting shiny objects, there is always a catch.

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The Power of a Primary Challenge

Wednesday, June 26th, 2013 and is filed under Blog, Elections, Issues

Conservatives are aghast at the actions of 15 GOP senators who are hell-bent on passing immigration deform despite the thousands of calls that are flooding into their offices.  It is truly bewildering how they are putting the desires of illegal immigrants and foreign lobbies over the vast majority of Americans, especially Republican and Independent voters.  Ultimately, we have nobody to blame but ourselves.  These scoundrels simply don’t fear us because we fail to challenge them every six years when they stand for reelection.

Primary challenges work wonders.  The latest example is House T & I Committee Chairman Bill Shuster.  He has never voted against a farm bill before.  But a challenge from Art Halvorson impelled a cathartic change in this big government Republican.  Here’s a notable report from Molly Hooper:

Several key GOP incumbents already have primary contests, including Transportation Committee Chairman Bill Shuster (R-Pa.) and Veterans’ Affairs Committee Chairman Jeff Miller (R-Fla.).

Both lawmakers were among those who bucked their GOP leadership team to oppose the farm bill last week. Shuster initially voted “yes,” then changed his mind on the House floor.

GOP incumbents representing safe districts are keenly aware they are under the microscope of influential conservative advocacy groups that “score” votes on key bills and amendments.

In addition to the final vote, Shuster made sure to vote for all the conservative amendments.  He voted to eliminate the Market Access Program, which grants corporate welfare for large producers to market their products overseas (Indian reality TV, wine tasting in Japan, etc.).  The timing is quite peculiar because he voted against an identical amendment in 2011. [Roll Call #457, 2011]

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A Roundup of Farm Bill Votes

Tuesday, June 25th, 2013 and is filed under Blog, News

As promised, here is a review of some of the major amendments offered during debate over the farm bill in the House.  You can click here to see the color-coded spreadsheet of how each Republican voted on the amendments and final passage.  The bill failed 195-234 with 62 Republicans voting no.

Here is a synopsis of some of the major amendments with the vote tallies:

  • Foxx, R-N.C., amendment that would cap the total amount of price loss coverage payments and revenue loss coverage payments during fiscal 2014 through fiscal 2020 at $17 million. It would require producer agreements to specifically state that payments made under these programs be reduced as necessary to comply with the cap. [Passed 267-156 : R 183-48; D 84-108…CQ]
  • Broun, R-Ga., amendment that would repeal permanent price support authority for milk. [Failed 112-309 : R 109-122; D 3-187…CQ]
  • Chabot, R-Ohio, amendment that would eliminate the Market Access Program, which grants corporate welfare to U.S. producers, exporters, private companies and other trade organizations to finance promotional activities for U.S. agricultural products.  In the past, taxpayers have funded reality TV shows in India and wine tasting in Japan. [Failed 98-322 : R 89-142; D 9-180]
  • Brooks, R-Ala., amendment that would terminate the Emerging Markets Program, which promotes exports of U.S. agricultural commodities and products in certain emerging global markets, after Sept. 30, 2013. [Failed 103-322 : R 101-129; D 2-193…CQ]
  • McClintock, R-Calif., amendment that would strike a provision in the bill that would authorize $10 million per year from fiscal 2014 through 2018 for a program to expand domestic farmers’ markets, roadside stands and community-supported agriculture programs. [Failed 156-269 : R 155-76; D 1-193…CQ]
  • Huelskamp, R-Kan., amendment that would allow states to create a work activation program that would require able-bodied individuals receiving Supplemental Nutrition Assistance Program benefits to complete two days of supervised job search at the program site each month. While in the program recipients may not refuse offers of employment or refuse to provide information on employment status without good cause. It would suspend SNAP benefits for individuals who fail to comply with the requirements. It also would repeal the nutrition education and obesity prevention grant program. [Failed 175-250 : R 175-57; D 0-193…CQ]
  • Kind, D-Wis., amendment that would limit federal crop insurance premium subsidies to producers with adjusted gross income of less than $250,000, limit per-person premium subsidies to $50,000, cap crop insurance providers’ reimbursement of administrative and operating expenses in 2013 at $900 million and reduce their rate of return to 12 percent of the retained premium. [Failed 208-217 : R 74-157; D 134-60…CQ]
  • Pitts, R-Pa., amendment that would direct the Agriculture secretary to lower loan rates for domestic sugar cane producers to 18 cents per pound for raw cane sugar for each crop year 2014 through 2018. It would require the Agriculture secretary to revise trade tariffs to lower the sugar stocks-to-use ratio to 15.5 percent. The department would be required to administer marketing allotments to ensure sugar supplies, be authorized to suspend or modify any marketing allotment provision and exercise discretion in administering the import quota to provide for adequate sugar supplies at “reasonable prices.” It also would repeal the sugar-to-ethanol program. [Failed 206-221 : R 137-95; D 69-126]

The Path Forward on the Farm Bill

Thursday, June 20th, 2013 and is filed under Blog, News

Today, GOP leadership suffered a stunning defeat as 62 Republicans voted against the 5-year farm bill (H.R. 1947), which locks in the record baseline of food stamp spending and creates multiple new agriculture subsidy programs.  A handful of them voted against it because it cut too much spending, and others like Bill Shuster voted no because they are facing potential primary challenges (Shuster voted for the 2008 bill).  But this is a strong showing, as it is a dynamic none of us would have ever predicted several years ago.

Some Republicans are complaining that because of the conservative revolt we will now continue on the status quo with direct farm subsidies.  But they fail to understand that the new price support programs and shallow loss coverage that were created by this bill would have been more expensive and represent worse market distortions than direct subsidies.  It’s better to reauthorize the status quo than to pass a long-term bill that creates even more problems and precludes real reforms for another 5 years.

Other Republicans complain that now we will face the so-called milk cliff.  Pursuant to a silly 1949 act of Congress, every time we fail to renew expiring farm programs, the government must begin imposing Soviet-style price controls on milk by decreasing supplies through massive purchases of milk, butter, cheese, and other dairy products.  Under permanent law, the USDA would begin purchasing dairy products at a rate of $38.54 per hundredweight, more than double the current price ($18 per hundredweight).  This market manipulation could double the price of milk, dairy products, and everything else up the food chain.

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Stalin’s Five-Year Plan Reincarnated

Tuesday, May 14th, 2013 and is filed under Blog, Economy, Issues, News

With farm incomes on the rise in recent years, what is Big Ag supposed to do?  How can they justify more subsidies?  Well, for one thing, they can spend more time demanding an endless flow of cheap labor to which they can pay below market wages.  But that would require the passage of an amnesty bill, something that many House members are not excited to do.  So now they are pushing a new farm bill, which is being sold as legislation that cuts the deficit and eliminates farm subsidies.  The reality is that this is nothing but a rope-a-dope ploy to expand government intervention and other forms of subsidies.

After extending the 2008 farm bill for an additional year last September, both the Senate and House agriculture committees are introducing new versions of the ‘5-year farm bill.’  You might be wondering why we need a farm bill.  What is this?  Stalin’s 5-year plan?  Well, after decades’ worth of direct subsidies, crop insurance, conservation subsidies, marketing loans, disaster aid, trade barriers, commodity price supports, and production controls, our agriculture system is sort of reminiscent of the Soviet Union.

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The Time to End Agriculture Dependency is Now

Tuesday, February 19th, 2013 and is filed under Blog, Issues

Despite the electoral failures of the past two presidential elections, we can still take solace in the fact that there are more red states than blue states; more red districts than blue districts.  Hence, there are more parts of the country where people are intuitively suspicious of a large federal government than where there are people who are overtly appreciative of the federal leviathan.  So why is it that there are only a small group of elected officials who are committed to significantly shrinking the size of the federal government?

Creating dependency is the catalyst for cementing a long-term coalition of big government statists.  Most people think of big urban states and cities when discussing the politics of dependency and special interests; however, the red states have their own share of parochial interests.  Any region or constituency can be fertile ground for creating dependency on the federal government, no matter how innately they are predisposition to hate the federal government.  It is not hard for a selfish politician to raise the specter of government involvement in a local interest and perpetuate the expectation that government will permanently foster that interest.

Nowhere is this phenomenon of red state dependency more evident than in the Agriculture community.  Farmers are naturally hard workers who believe in rugged individualism.  But self-centered politicians representing these districts have worked in tandem with local parochial interests to ensure that the people of some of our most conservative districts are only represented by supporters of big-government dependency and special-interest politics.  In order to secure an endless flow of farm subsidies (or energy subsidies), these politicians have often teamed up with other special interests in Congress to help grow all sectors of government.  Hence, we have some of the most conservative districts being represented by members who help promote the greatest common factor of all spending bills.

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Let’s Just Call the Bush Tax Rates a Subsidy

Tuesday, December 11th, 2012 and is filed under Blog, Taxes

Listening to the self-righteous protestations of the class warriors, one would come away with the impression that the rich don’t pay any taxes.  In fact, the top 1% of tax filers paid 37.4% of all federal income taxes in 2010; the top 2% paid almost 50%.

Unfortunately, when it comes to real handouts for the rich, liberals are silent.  In their dyslexic worldview, a tax cut is a handout and a handout is a tax cut.  That is why both Democrats and Republicans are plotting to surreptitiously slip in a farm bill to the final negotiations over the tax rates.

At present, more than 3/4 of farmers who earn upwards of $250,000 a year receive subsidies from at least one farm program.  Farm subsidies and crop insurance programs help promote income inequality in farming by offering larger subsidies to those who already have larger farms.  These farmers can enjoy multimillion dollar insurance policies that are subsidized in order to guarantee their multimillion dollar investments that would otherwise not be supported by the free market.  Also, federal guarantees of bankers’ loans to rich farmers have further increased their borrowing capacity, thereby driving up the cost of land acquisition.  This, in turn, has shut out small farmers from the business, making it nearly impossible for them to compete.

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Obama’s Legacy: Prices Up; Income Down

Thursday, October 25th, 2012 and is filed under Blog, Economy, Obamacare, Taxes

Barack Obama’s pitch for a second term is singularly built upon blaming his predecessor for the malaise.  However, the irony is that he is slated to leave office and saddle the next president with his legacy; higher consumer prices and lower income.

Here is what consumers will confront over the next 6-12 months, according to a new analysis by Moody’s Analytics cited by Reuters:

Another area of concern for consumers is food prices. Rises in the prices of corn and soybeans and other field crops as a result of drought this year in the U.S. Midwest are expected to feed through into food prices late this year and in early 2013.

U.S. soybean prices jumped 40 percent over the summer, while wheat shot up about 50 percent. Prices have eased a bit since then, but the increases are expected to filter down to consumers.

“We are starting to see evidence of food prices moving up so that’s definitely going to be a drag on disposable incomes,” said Hoyt of Moody’s Analytics.

The U.S. Department of Agriculture sees food price increases of 3.5 percent to 4.0 percent next year, greater than this year.

Hoyt says that could cut 0.2 percentage point from economic growth over the winter, when food prices could peak.

Reflecting the strain on many budgets, U.S. shoppers plan to spend an average of about $750 on gifts, decorations and other holiday items this season, only 1.2 percent more than a year ago, according to a recent survey published by the National Retail Federation.

That would be the smallest increase since 2008-2009, when holiday sales fell 1.8 percent during the financial meltdown.

“You could argue that we are still at recession levels on a lot of the consumer indicators,” said Jeffrey Cleveland, a senior economist at investments manager Payden & Rygel in Los Angeles. “I don’t expect the consumer to be a powerhouse.”

Another big extra outlay will be in healthcare premiums, which on average are costing employees more than $2,200 in 2012, according to Aon Hewitt, a human resource consulting firm.

Average health care premiums are forecast to jump by 6.3 percent in 2013, according to Aon Hewitt

Over the last five years, employees’ share of healthcare costs will have increased more than 50 percent, it said.

On top of everything else, the cost of a college education is being felt more keenly by many Americans.

Tuition costs for the 2012-13 academic year rose again but federal grant aid and tax benefits did not increase in the previous year – the most recent for which data is available – according to a report published on Wednesday by the College Board Advocacy & Policy Center.

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Billions in Green Energy Subsidies Created Just 28,854 Jobs

Thursday, October 11th, 2012 and is filed under Economy, News

So what ever happened with Obama’s promised 5 billion green energy jobs?  Here’s the latest Bloomberg analysis:

The American Recovery and Reinvestment Act of 2009 set aside $90 billion in renewable energy grants and loans for a grab bag of thousands of projects—wind farms, solar installations, natural gas fueling stations, biofuel research, and a $5 billion weatherization project for low-income homes. Digging into the public records of the $21 billion spent so far through 19 U.S. Department of Energy programs reveals 3,960 projects that employ 28,854 people.

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Chevy Volt Leases Costing Taxpayers $10 per Gallon of Gas Saved

Wednesday, October 3rd, 2012 and is filed under News

We’ve heard Obama assert ad nauseum that he has revived GM.  Aside for the fact that it is not GM that he revived, rather the UAW, there is something even more fundamentally flawed with his assertion.  GM sales did not spike as a result of organic growth in the company; they spiked as a result of taxpayer subsidies.  Anyone could throw taxpayer money into a specific company and realize a short-term spike in sales.  Nothing is more absurd than the supposed success of the Chevy Volt.

The National Legal and Policy Center breaks down the lopsided cost of the subsidies:

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