Cows on the Cliff
Wednesday, January 2, 2013
COWS ON THE CLIFF: In the closing hours of 2012, negotiations between President Barack Obama and Congressional Republicans seem to have arrived at some compromise on the revenue side of the so-called “fiscal cliff.” Considerable negotiation remains on the cliff’s other side, the across-the-board spending cuts known as the “sequester.”
A titanic debate is unfolding in this country over who gets to keep and control (and spend) the nation’s wealth.
President George W. Bush decided the federal surplus he inherited from the prior Administration should be delivered back to taxpayers in the form of a sharply regressive tax cut. This was done without a lot of thought or regard to existing federal spending programs (we might be generous and grant there was a theory that the cuts themselves would spur the economic growth required to trickle down to those programs; however, that generous grant glosses the very strong cry from Bush’s party leadership that those spending programs needed to be suffocated by strangled revenues). Bush overcame objections by marking the tax cuts as impermanent, constructing them with a ten-year fuse that would blow up on some future Administration.
Roll ahead 10+ years, and those programs have not suffocated. They’ve been put on life support in the form of debt and deficits.
The deal apparently struck this week by Obama and aggrieved Congressional Republicans would return about $600 billion to those programs by restoring Clinton-era tax rates on that portion of annual personal incomes above $400,000, according to analysis by the Tax Policy Center. Those revenues will go some way, although certainly not all the way, toward paying for those programs that did not die by garrote.
Two years ago, an appointed Congressional supercommittee proposed across-the-board cuts to the discretionary portion of the federal budget as a means of creating a deadline to resolve continued debate over the size of that discretionary budget. It’s worth noting here that only about 40 percent of the federal budget is actually discretionary, with the greatest portion of spending—which includes Social Security, Medicare and related “safety net” programs—mandated by law. Within the discretionary portion is the military and just about any other federal program you might name. Taking no sides on the issue of whether the military trumps other government endeavors, the supercommittee deemed funds would be sequestered equally from all of those programs at the start of 2013, a deadline of imposed austerity designed to bring parties to the negotiating table.
Yet not every federal program benefits a “welfare queen.”
One of the largest recipients of federal subsidy is agriculture, supported by programs put in place to help keep farms working and the costs of food from skyrocketing.
Federal lawmakers, working with state governments, have proposed a one-year extension of the expiring U.S. farm law that, if enacted, would head off a possible doubling of retail milk prices to $7 or more a gallon in early 2013. Such a rapid and massive increase could topple northwest Washington dairy industries, dairy association experts fear.
The extension would end a 32-month attempt to update farm subsidies dating from the Depression era, when farmers were crushed by low prices and huge crop surpluses, to meet today’s challenges of tight food supplies, high operating costs and volatile markets. The bill was listed among measures that could come to a vote by the full House of Representatives. Republicans, many of whom represent rural districts, support a bill, or an extension of current law, in theory. In practice, an agreement could become ensnarled in the larger debate about the size and scope of federal spending.
Of particular interest to Whatcom dairies, the proposal might revitalize a new dairy subsidy program. It would compensate dairy farmers whenever milk prices are low and feed prices are high. The so-called margin-protection program would require farmers to limit production to avert a long run of low dairy prices, stabilizing markets.
Traditionally, the dairy program sets a minimum price for milk through government purchase of butter, cheese and dry milk. If Congress does not act, the dairy support price will revert to the level dictated by an outmoded 1949 law that is roughly double the price now paid to farmers. The potential retail milk price has been estimated at $6 to $8 a gallon versus current levels near $3.50, which have held steady for more than a decade. The proposal out of the agricultural committee is more stopgap than stunning, proposing to simply extend 2008 provisions while Congress works through larger issues of the sequester.
Agriculture Secretary Tom Vilsack, in an interview with CNN, said higher milk prices—if it comes to that—would ripple throughout all commodities “if this thing goes on for an extended period of time.” Certainly it would cripple a vital local industry and place additional stress on the conversion of county resource lands.
While dairy producers generally support the so-called margin-protection program as the answer to high feed costs, processors and foodmakers oppose it. They say it is wrong-minded to curtail production when prices are low, and it will destroy a healthy export market for dairy products. Yet, clearly, changes that raise the costs of food similarly raise the costs of providing food through federal assistance programs.
Senators passed a farm bill in June estimated to save $23 billion over 10 years, with most of the cuts in crop subsidies and conservation programs. The House Agriculture Committee approved a bill with $35 billion in cuts in July, half of it in food stamps for the poor—the biggest cut in food stamps in a generation.
Perhaps in 2013 we might stop lurching from self-imposed crises and stalled solutions to truthfully acknowledging the fundamentals of our economy and the problems that actually exist in the world. Happy New Year.