Conley, Chip

English

Research Papers in Economics

A LEGISLATIVE  PERSPECTIVE
ON CURRENT AND  FUTURE  CHANGES
IN U.S.  FARM  POLICY
Chip Conley
House Committee on Agriculture
As of this writing,  Congress  can claim  two significant  agricultural
legislative  accomplishments:  the  Omnibus  Reconciliation  Act of 1993
(OBRA)  and the Emergency  Supplemental  Appropriations  Act  of
1993. Also nearly finished  is agriculture  appropriations  legislation  for
fiscal year  1994.
The first legislative accomplishment,  OBRA,  is a combination  of
spending reductions and tax increases designed to reduce the feder-
al deficit nearly half a trillion  dollars from fiscal year 1994  to fiscal
year  1998.  Of that amount,  a projected  $3 billion  is to be saved  from
agriculture commodity,  conservation and crop insurance  programs.
There is  criticism  from  some quarters that half of the  $3  billion
reduction will  not be realized  as true expenditure  reduction.  Critics
argue that some  measures related to crop acreage  reduction  pro-
gram levels are  specific to conditions in the Congressional Budget
Office baseline,  which  are unlikely to be realized  and, consequently,
will not result in any savings.  Other legislated reductions require the
administration  to make program  changes within  its discretionary  au-
thority  and that it already  announced  prior to the  drafting of legisla-
tion.  Requirements  to reduce  excess  losses  in the  Federal  Crop  In-
surance  program  are  cited  as  an  example  of changes  the
administration  had already announced.  It is  also argued that
changes  in the  timing  of outlays,  such  as  the requirement  to  repay
soybean  loans within the same  fiscal  year  they were  originated,  do
not truly reduce government costs.
The second significant  piece of legislation,  the Emergency Supple-
mental  Appropriations  Act  (Supplemental),  reflects  the president's
request to provide  emergency  flood relief to the Midwestern  states.
Nearly $2.7  billion in disaster assistance  is available  to farmers  incur-
ring crop losses resulting from  1993  disasters.  The cost may well  ex-
ceed the $2.7 billion estimate, however.  The Senate struck the re-
quired  50  percent  proration of payments  which  were  authorized  in
the  1990  farm  bill.  Moreover,  there is  no absolute  limit on total pay-
ments  because  the  Supplemental  requires  the use of Commodity
Credit Corporation funds  should demands for disaster assistance  ex-
ceed  $2.7  billion.  Finally,  the  Supplemental  has been designated  as
64an emergency requirement,  thus exempting it from provisions of the
1990  Budget  Enforcement  Act  that would  otherwise  require  offset-
ting reductions in other appropriations.
The agriculture  appropriations  bill,  in conference  report form,
awaits  Senate  action,  having  passed the  House  in  early  August.
Some changes may still occur in Senate  deliberation,  but the $71  bil-
lion of budget authority is not likely to change significantly.
How do the events thus far in this congressional  session suggest
agriculture will fare in the future?  It is still too early to draw  specific
conclusions,  but  some themes  begin to emerge.  The  Clinton admin-
istration has not revealed  itself clearly with regard to agriculture,
but  it does  not appear  to  have  the  ideological  bent  against  govern-
ment  involvement  in agriculture  demonstrated  by the  first Reagan
administration and, to a degree,  the Bush administration.
The Clinton presidential campaign had endorsed the 1990  farm bill
policies but questioned their implementation.  Some reductions in ag-
riculture spending,  proposed as part of the administration's econom-
ic  program,  seem  to  echo  previous  Reagan-Bush  proposals.  These
include  increased  user-fees,  federal  crop  insurance  program  re-
forms, reduction  in rural electrification  subsidies,  and reduced  pay-
ment acres for income  support payments  to farmers.  Some  policies,
such as  "means-testing"  farm program payment  eligibility based on
off-farm income,  suggest a populist inclination  to target assistance  to
some notion of "small"  farmers.  Proposals for increased  rural devel-
opment program expenditures also  reflect a desire  to "invest"  in the
economically  deprived.  The  administration's  request  for  a  disaster
relief supplemental  appropriations  bill underscores  a  desire to  help
those  clearly in  need. These inclinations  may be repeated in  Clinton
farm bill proposals in 1995.
Despite the conservative nature  of the proposals to reduce agri-
culture  spending,  the total cuts,  $7  billion in mandatory  spending
over  five  years,  was  less than  a third of the $22  billion proposed  by
President  Bush in his  1990  budget submission  for fiscal  1991.  The $3
billion reduction  in farm  spending  in  1993  OBRA  was less than a
quarter  of the  $13.6  billion reduction  in  1990  OBRA  even though
both bills  were projected,  over  a five-year span,  to reduce  future
deficits  nearly  $500  billion,  of which  about  $100  million  were  at-
tributed to gross reductions in mandatory  spending programs.
For the moment,  pressures  to change  agriculture  appear to  come
from directions  other than the budget reconciliation  process  as th ey
have since 1981.  The agriculture  appropriations  bill awaiting  final
approval  illustrates  this. It seeks  reforms or  reductions  in  programs
that  have  come under criticism  such  as  federal  crop  insurance,  the
Market Promotion Program, and restrictions on export promotion of
tobacco  and on funding  of Women,  Infants and Children clinics that
do not prohibit smoking  and  on school  lunch programs  that require
65offering whole  fluid  milk.  Also debated  was  the  elimination  of fiscal
1994 funding for the honey program.
Other  reductions,  such  as the limitation of annual enrollment  in
the Wetlands  Reserve  Program  to  50,000  acres,  were  made to  pro-
vide  additional  funding  to  other  Appropriations  Committee
priorities.  These  reductions  were  considered  necessary  because  of
the budget caps,  continued  in the  1993  OBRA, that froze appropria-
tions spending at,  or below,  the fiscal  1993 level.  This  is a trend that
will likely continue  in the  future as  capped appropriations  spending
will force  programs  to  compete just to maintain  their real  1994
spending  levels.  Even  greater  competition  will  come  from  "invest-
ment"  initiatives  announced  by President  Clinton as  part of his eco-
nomic  program.
Further  changes to agriculture  will be proposed  in the  Clinton ad-
ministration's  National  Performance  Review  as part  of the  effort  to
"reinvent  government."  The introduction  already made  contains
proposals  to transfer the Food Safety Inspection  Service from the
U.S.  Department  of Agriculture  (USDA),  to the Food  and Drug Ad-
ministration,  eliminate  the  wool,  mohair  and  honey  programs,  and
close and consolidate USDA agency field  offices.
Perhaps the most noteworthy aspect of these developments from a
legislative perspective  is their drifting from the legislative jurisdiction
and  vehicles  over  which  the Agriculture  Committees  have  primary
control.  In the past, a multi-year farm bill has been the venue for de-
bate and votes on  such issues.  Today,  we see the debate happening
in the Appropriations  Committee  and,  in the case  of reinventing  gov-
ernment, before  committees  concerned  with government operations
and other jurisdiction.  That means  not only less  control  over legisla-
tion  and  floor  rules governing  that legislation,  but  also  repeated
votes on issues.  The honey program,  for instance,  will not only have
been  debated  and voted  on  three  or four  times this  year  as part of
OBRA and appropriations  bills,  it will still  face  legislation under the
National Performance  Review proposals.
Trade  issues,  principally  the  North  American  Free Trade Agree-
ment (NAFTA) and trade liberalization under the Uruguay Round of
the  General Agreement  on Tariffs  and Trade  (GATT),  hold the
promise  of net benefits for American agriculture.  It is unclear  when
implementing  legislation  will  appear  before  Congress,  however.
While  the administration  has a NAFTA  agreement  in hand,  it  faces
daunting  opposition  in the  House.  Majority  Whip David  Bonior has
said  he  thinks  three-quarters  of House  Democrats  will oppose
NAFTA. This makes  its passage questionable at best.
The trade agreement in GATT has yet to be concluded in spite of the
expiration of the congressional fast track resolution in December of this
year.  Though the focus of negotiations  has shifted to non-agricultural
issues,  because  of the Blair House agreement between the United
66States and the European  Community, the new French government is
making declarations that seek to undermine  the Blair House accord
and may be eliciting German support for their position.
Of interest  is the possible interaction of NAFTA and GATT.  There
is  no  requirement that  NAFTA  legislation  be taken  up  before
GATT,  but its defeat  would appear to have a most deleterious  effect
on GATT negotiations,  shoring up the French position  to undermine
the Blair House  accord.  It appears  some  of the  agricultural  NAFTA
opposition  may be more  anti-GATT  in nature-such as  that of some
farm commodity interests  to Section  22  quota protection-with hope
that a defeat of NAFTA would lead to  a failure in the GATT negotia-
tions. All this suggests  the legislative  outlook, both  strategy and out-
come,  is unclear,  which  is unfortunate  because  it  may  be agri-
culture's best legislative initiative for some time.
There  is some  good news on the regulatory  front.  The Clinton ad-
ministration  has released a policy statement on wetlands protection.
Regarding  agriculture,  the statement  announces  that recently  com-
pleted  agency  rule making will  assure that about 53  million acres of
prior converted cropland  will not be subject to regulation  under Sec-
tion 404 of the Clean Water Act.  In addition,  the statement  desig-
nates  USDA's  Soil  Conservation  Service  (SCS) the lead  agency  on
wetland delineations  for agricultural lands  and provides that  SCS
and other involved agencies  will use the same procedures  to  deline-
ate wetlands.
In a  similar spirit  for pesticide  legislation,  the  Clinton administra-
tion  has  indicated  it  will  propose food  safety legislative  alternatives
to the  Delaney clause,  a  1950s  provision  of law that requires  the
presence  of no  carcinogenic  agents. This  is particularly important
since  courts have  held that Delaney  is an  absolute  standard,
overturning  the  de minimus standard  for pesticide  residue  that has
been used for some  time.  Such a court ruling threatened  the use  of
many currently registered  pesticides.
For the longer term,  we must  look to the  1995  farm bill.  As stated
earlier,  a Clinton farm bill might have a structure  similar to the  1990
farm  bill,  with populist overtones.  Though the president's  farm  pol-
icy may seek to preserve  a large measure of the budget resources
for farmers, larger budget policy concerns may not permit this.
The Congressional Budget  Office  (CBO)  has just released  the Au-
gust update  of its  1994 budget  outlook.  Taking account  of the re-
cently  passed  OBRA and  recent macroeconomic  changes,  the  CBO
projects  the  deficit  to  decline  from  $266  billion  in fiscal  1993  to  $190
billion in fiscal  1996  and then to increase to $360 billion by fiscal 2003.
More  importantly,  the deficit  increases  its share  of Gross  Domestic
Product  every year, from  2.5 percent  in  1998 to  3.6 percent in 2003.
This  is largely the result of double  digit growth rates in Medicare
67and Medicaid,  the  only major  spending categories  to  increase faster
than growth in the economy.
These projections suggest that more budget cuts face Congress be-
fore the deficit ceases to be an economic  problem. The analysis of
the deficit's  increase,  growth in health  care program spending,  sug-
gests at which area the reductions  might be best directed,  but it is
questionable  if this  will  happen.  The Clinton  administration  health
care  reform  proposals  are expected  to  increase  access  to  health  in-
surance  and health  care.  Health  care  reform,  when  finally  passed,
may further reduce the Medicare  and Medicaid spending  levels, but
it will unlikely alter the  cost structure  of providing health care,  at
least over the next five years.  Consequently,  in  1995,  the Clinton  ad-
ministration  and  Congress  may  feel  the  need  to  further  reduce  en-
titlement spending.  To attempt to stem the growth,  additional cuts in
health care programs  may be in order,  but other entitlement  pro-
grams will not go unscathed.
Congressional  budget committees  will  not  likely  focus  on popular
health care  programs  only.  They  will likely  seek  significant  reduc-
tions in other  entitlement programs such as agriculture,  veterans,  or
federal retirement,  even though these  programs represent  2  per-
cent,  5 percent  and 22 percent,  respectively,  of 1998 health care pro-
gram outlays.  Agriculture,  with  two  million  farmers,  may  have  the
smallest constituency of these three, and budget committees may re-
member  that agriculture  took only a  $3  billion  reduction  in the  1993
OBRA.  If they believe  only half were true program reductions,  and
recall the  $2.7  billion in disaster  assistance,  budget committees may
seek reductions  in agriculture  similar to the  25 percent  of projected
spending obtained in the  1990 OBRA.
Reductions  of this magnitude  may lead  agriculture  committees
back  to reductions  in payment  acres,  the most  obvious  means  to
reduce  deficiency  payments,  which  are  the  bulk  of annual  com-
modity  program  outlays.  New  approaches  also  may  receive  consid-
eration.  One  alternative  might be to convert  income support pay-
ments  into  some form  of conservation/environmental  payments
made for compliance  with so-called  sustainable cultivation  practices.
These  payments  would  not in themselves  reduce  expenditures,  but
would  broaden the political  constituency  for payment  to farmers.
Revenue insurance,  in one form or  another, may be considered  as a
policy that could reduce  commodity program spending  while provid-
ing producers  a means to manage  risk associated with crop loss and
macroeconomic  factors that  have  affected  farm  income  beyond  the
reach of traditional farm programs.
Pressure  for  legislative  changes  will continue  to confront  agri-
culture on several new fronts. The question for agricultural  interests
and  policymakers  is  whether  they  will look  forward,  and  adapt,  to
changes or resist and fight rearguard battles, perhaps dissipating the
government resources available  to agriculture.
68

A LEGISLATIVE PERSPECTIVE ON CURRENT AND FUTURE CHANGES IN U.S. FARM POLICY

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Research Papers in Economics