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December 10, 2012

The Agricultural Cliff

Posted in: Uncategorized

Debbie Stabenow

Debbie Stabenow says she cannot accept another extension

Another serious cliff resulting from the silly way Congress does business concerns the failure to pass a farm bill earlier this year. The Senate passed its own with bipartisan support, the House Agriculture Committee passed a version and then the House leadership refused to put that onto the floor for a variety of reasons. They broke in September without a plan for passage, and the lame duck session has been consumed by negotiations through the media on the fiscal slope, without addressing the farm bill.

At the time, there were assurances that the consequences for failure of passage would be minimal. The farm bill lasted until the end of September, after all, which meant that current crops would be grandfathered in under the old policy. Milk and dairy farmers would feel an immediate pinch, but overall the problem would be relatively contained.

That’s not true once the new year rolls around. At that point, you’d be dealing with new crops and a new harvest, and they would be administered under 1949 rules, particularly for price supports. Here’s how I described it earlier this year:

The larger issue concerns federal price supports. Those prices, the rates at which the government pays for certain commodities, would revert back to 1949 levels. For the most part, those were much higher, especially in areas like wheat ($13.58 per bushel in 1949, more like $6 today) and dairy products ($38.63 per hundredweight in 1949, closer to $10 today). The government would pay much more for those commodities, though not all of them; federal price supports for things like soybeans didn’t exist in 1949. This will absolutely drive up the price that businesses will have to pay for the same commodities, and that will factor into your monthly food bill.

The Economist notes that this would effect milk and dairy products right away, seeing as they get “harvested” year-round. The way to stop this from happening is fairly simple: Congress could just pass a short extension of current law under the old farm bill to give themselves more time. However, Senate Agriculture Committee chair Debbie Stabenow rejected that idea before the election, saying she could not accept another extension. This is a common bargaining tactic, but I don’t think we should place any faith in Congress’ ability to do the sensible thing. As The Economist writes, “the mere fact that both sides want a solution is no guarantee it will happen.”

I think the lack of attention granted to both this issue and the issue of the expiration of the Mortgage Forgiveness Debt Relief Act makes it more likely that we’ll tumble over the cliff, sadly.

Photo by Matt Hampel under Creative Commons license


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