112th Congress Adjourns, 113th Congress Sworn In – Fiscal Cliff Bill Signed by President – Controversial Farm Bill Extension included in Fiscal Cliff Package; Committees Rebuffed – Only Dairy Processors Seem Happy with Farm Bill Extension – Cochran Bumps Roberts as Ranking Minority on Senate Ag Panel – Boehner Re-Elected House Speaker – MF Global Bankruptcy Decision Reached – Mississippi River Level Continues to Drop; Shippers See Traffic Shutdown – Superstorm Sandy Package Split; Big Vote Delayed
Within 30 minutes January 3, Congress adjourned for the 112th session, and convened the 113th Congress, swearing in new members and electing leadership. Generally, there is a month or two between adjournment and a new Congress, but fiscal cliff negotiations dragged the last session out to the last minute.
Proving once again that Congress loves a deadline, negotiators cobbled together an 11th-hour fix to avoid sending the nation’s economy over the fiscal cliff, tacking on a nine-month extension of the 2008 Farm Bill and an extension of a congressional pay freeze for good measure. Both chambers approved the measure – the Senate on an 89-9 vote; the House cutting it closer on a 257-167 vote as fiscal conservative members said the bill did not contain enough spending cuts – and the President signed the bill January 2.
The package could be considered a classic compromise as based upon reactions from both sides of the aisle, no one is happy with effectively kicking the fiscal cliff fix into the new Congress. While congressional action prevented the predicted dire economic impact of diving off the fiscal cliff, and Wall Street reacted positively, the action taken simply defers decisions on spending cuts, revenue increases and broader tax reform, all of which House Speaker John Boehner (R-OH) vows will be part of the House 2013 legislative agenda.
The fiscal cliff law “permanently” extends the Bush era personal income tax rates on individuals making less than $400,000 and couples making less than $450,000. Income above those rates will be taxed at a new rate of 39.6 percent, up from 35 percent, along with an increase in the capital gains and dividend tax rates on the higher income from 15 percent to 20 percent. Included in the package is an adjustment to the federal estate tax, a major priority for farm and ranch groups. The maximum federal estate tax rate will increase from 35 percent to 40 percent, but exempts the first $5.12 million in estate value. Without this action, the estate tax would have reverted to the pre-2001 tax rate of 55 percent with just $1 million exempted. The deal also extends so-called portability rules so the exemption can be passed to a surviving spouse. The alternative minimum tax is “patched” permanently to prevent increased taxes being paid by millions of tax payers on 2012 income.
Other tax adjustments include permanent extension of the child care tax credit; extension of adjustments in the earned income tax credit and preserving the marriage tax penalty fix, along with several education-related credits preserved and extended. The spending cuts mandated by the 2011 Budget Control Act – nearly $1 trillion in savings over a decade by setting discretionary spending caps; $109 billion due in 2013, with half coming out of the military budget – are postponed through the end of February, 2013, partially replaced by a combination of spending cuts and revenue increases. Part of these savings is through adjustments/cuts in various health programs, including portions of Medicare. The bill also extends through the end of 2013 eligibility for expanded unemployment insurance benefits for laid-off workers, and reduces the maximum 99-week eligibility to 73 weeks.
Lastly, a set of “extenders” – various tax credits which expired at the end of 2011 – were extended for the 2012 and 2013 tax years and include several energy-related tax credits, including the $1-per-gallon blenders tax credit for biodiesel and renewable diesel, as well as a credit of $1.01 per gallon on cellulosic biofuels, with the new inclusion of algae-based biofuels, and a small producer biodiesel tax credit of 10 cents per gallon. Also included is extension of the credit for alternative fuel vehicle refueling property; the research and development tax credit; 50 percent bonus depreciation rules on property placed in service before 2013; the ability of financial service companies and manufacturers with financing divisions to defer taxes on income earned overseas from active financing operations; the “new markets tax credit” for investment in community development; low-income housing tax credits and the work opportunity tax credit. Controversial for their inclusion in the package are provisions allowing a seven-year recovery period for motor sports racetrack property in lieu of the existing 15-year period, and a special expensing rules for film and television production allowing expensing of the fist $15 million in production costs, or $20 million in “distressed areas.”
The new fiscal cliff law signed by President Obama this week includes what amounts to a straight nine-month extension of 2008 Farm Bill authorities, providing what some call 2013 “certainty” for farmers and ranchers and others call far too little far too late. House Agriculture Committee Chairman Frank Lucas (R-OK), who has publicly said he can live with a one-year extension because it gives both House and Senate ag committees time to craft a comprehensive bill, called the fiscal cliff Farm Bill extension a “miracle” given the political atmosphere on Capitol Hill. That miracle was largely due to an 11th-hour White House push to avoid a near doubling of consumer milk prices had dairy supports reverted to 1949 law.
Lucas said he has tentatively scheduled his committee’s markup to begin February 27, but cautioned that could slip. In a slap to both the House and Senate Agriculture Committees, congressional negotiators considered and rejected a bipartisan Farm Bill extension package submitted by Senate Agriculture Committee Chairwoman Debbie Stabenow (D-MI) and Lucas, as well as Lucas’ ranking member, Rep. Collin Peterson (D-MN), that included a new dairy support program, re-invention of disaster programs and cuts in direct payments to pay for the package.
Senate Agriculture Committee ranking member Sen. Pat Roberts (R-KS) did not endorse the extension package. Vice President Joe Biden, heading up the Democrat side of Senate negotiations, and Senate Minority Leader Mitch McConnell (R-KY) said the committee package risked several budget procedural challenges on the floor, endangering the broader package because it contained the new dairy reform measures and expanded livestock and specialty crop disaster assistance. Further, House Speaker John Boehner (R-OH), a long-time enemy of dairy support programs, argued against the inclusion of the new dairy support reform language pushed by the National Milk Producers Federation.
While Lucas and Stabenow had included long-term savings by trimming direct program payment rates, the Congressional Budget Office said the compromise package had a first-year cost close to $1 billion. After the package was rejected, Stabenow was furious, calling the language eventually accepted an extension of only some programs. She, however, voted for the fiscal cliff package.
What’s in the Farm Bill Extension? The fiscal cliff law includes a general extension through September 30, 2013, of most of the recently expired provisions of the 2008 omnibus Farm Bill. The new law makes U.S. Department of Agriculture program authority retroactive to September 30, 2012, the date most farm programs expired. Savings are achieved by shifting funding for several programs from strictly mandatory to a combination of mandatory and discretionary, meaning that previously the Secretary had to spend money to run a program, he can now decide to not fund specific programs at their full authorized level if he chooses or if the money isn’t forthcoming from appropriators.
Several programs will need specific Appropriations Committee action to get funding. Included in this new category of spending are 37 program areas, including food stamp-related programs, research, energy, horticulture and organic agriculture, along with funding for socially disadvantaged farmers and ranchers, as well as some livestock disaster programs. For commodity programs, the new law extends current programs for all commodities for the 2013 crop year, and includes peanuts, sugar beets and sugar cane. It also extends the Dairy Product Price Support Program and the Milk Income Loss Contract Program through December 31, 2013.
The Conservation Reserve Program is maintained at a maximum enrollment of 32 million acres, and most of the biofuels programs run by USDA are also extended through the 2013 crop year, but some are not automatically funded. Also included is authority – but no money – for the livestock indemnity program, the livestock forage disaster program, the emergency assistance for livestock, honeybees and farm-raised fish, and the tree assistance program.
The extension of most of the 2008 Farm Bill authorities included in the fiscal cliff package drew widespread shock and awe from most agriculture and input organizations that had campaign hard for a new full five-year omnibus Farm Bill. However, the International Dairy Processors Association congratulated Congress and President Obama for its actions to avoid the fiscal cliff. IDFA strongly opposed the new dairy support programs pushed by the National Milk Producers Federation and included in a bipartisan package hammered together by the chairs of the respective ag committees. Jerry Kozak, NMPF president, told the Hagstrom Report this week the extension “amounts to shoving farmers over the dairy cliff without providing any safety net below.” Bob Stallman, president of the American Farm Bureau Federation, said the extension was little more than a stop gap measure, and said ABFA is “disappointed that Congress was unable or unwilling to roll a comprehensive five-year bill into the fiscal cliff package. The National Corn Growers Association said the extension is “Congress’ failure to act, push(ing) agriculture aside … NCGA is tired of the endless excuses and lack of accountability. The system is clearly broken.” National Farmers Union said the extension “left rural America out in the cold.”
Sen. Thad Cochran (R-MS), a member of the Senate Agriculture Committee since 1979 and chairman of the committee in 2003-2005, this week exercised his right of seniority and opted to take the ranking minority slot on the Senate ag panel. In a related announcement, Senate Minority Leader Mitch McConnell (R-KY) announced there will be nine GOP members of the ag committee, one less than in the last Congress. In response to Cochran’s decision – and in a very classy move – Sen. Pat Roberts (R-KS) said January 3 in a formal statement he will step aside as ranking member of the committee, pledging Cochran “my full support, and I will move his nomination when I bring the committee together for a vote … I expect it to be unanimous.” Late January, 3, the full Republican side of the committee endorsed Cochran.
The senior Mississippi Senator lost his ranking spot on the powerful Senate Appropriations Committee because he was term-limited under Senate rules. “Seniority is a well-respected and historic privilege in the U.S. Senate, and Sen. Cochran has my full support.” Roberts said in a statement, “Rest assured I will remain a strong and vocal champion for agriculture as a senior member of the committee. I will retain my Finance Committee seat and as a senior member of this committee, I am able to affect trade policy, especially ag trade, tax reform and rural health care. No matter whether I hold the gavel, or whether I am the ranking member or whether I am a senior member, agriculture has always been a top priority of my efforts in public service. Nothing will change that.”
Both Cochran and Robert will remain members of the Senate Rules Committee, with Roberts become ranking member of that panel. In his statement, Roberts pledged his support to help pass a five-year farm bill, action that was remarkably cooperative when Senate Agriculture Committee Chairwoman Debbie Stabenow (D-MI) and Roberts went to work this year to fashion a bill eventually passed by the full Senate by a wide margin. That bill, however, angered southern crop producers who argue it favors large Midwest corn and soybean farmers, and Cochran’s ascension to ranking member – along with his alliance with former committee chair Sen. Saxby Chambliss (R-GA) – means Stabenow will have to return to the drawing board, at least on the commodity title, when the committee takes up the Farm Bill again this month. The House Agriculture Committee-passed Farm Bill includes changes to the commodity title that include marketing loans and deficiency payments, a scheme much more friendly to southern producers and one Cochran would likely endorse.
Rep. John Boehner (R-OH) was re-elected Speaker of the House for 113th Congress this week, ending speculation he could lose the top House job over broad bipartisan disenchantment with the deal cut by House and Senate leaders to avoid the fiscal cliff. Needing 217 votes, Boehner received 220, House Minority Leader Nancy Pelosi (D-CA) received 192, and 15 members voted for themselves or outsiders, including three who voted for House Majority Leader Eric Cantor (R-VA). Cantor voted for Boehner. While Boehner lost 10 GOP votes, Pelosi lost five Democrat votes as the tally was completed just after the 113th Congress was sworn in. The defections were expected given how controversial the fiscal cliff vote was for both GOP and Democrat fiscal conservatives who wanted more spending cuts. The Speaker need not be a sitting member of Congress to be elected.
The MF Global Inc. estate will receive $500-$600 million under a bankruptcy agreement announced by James Gidden, trustee for the MF Global liquidation, and Richard Heis, a joint administrator of MF Global UK Ltd., PorkNetwork reported. Once the bankruptcy court approves the deal, Giddens said the agreement between MF Global Inc. and MF Global UK Ltd. will “result in 100 percent satisfaction of allowed securities customers’ claims and significant additional distributions to commodities customers who trade on U.S. and non-U.S. exchanges,” the report said. The agreement can be read at www.mfglobaltrustee.com.
While Mississippi River levels are expected to rise temporarily between Cairo, Illinois and St. Louis, the National Weather Service forecast sees river levels continuing to drop over time to near-record low levels. Meanwhile, the deteriorating situation means river traffic could come to “an effective halt” sometime before January 15, according to data, including new Army Corps of Engineers analysis and forecasts released by the American Waterways Operators and the Waterways Council, Inc. A shutdown will affect 8,000 jobs, will cost $54 million in wages and benefits, and will halt movement of 7.2 million tons of commodities with a value of $2.8 billion, the groups said. The Corps of Engineers says its efforts to blast rock pinnacles out of the shipping lanes and continued dredging of soft bottom sections of the river to maintain a nine-foot channel will be successful and traffic will continue to flow. Shippers continue to push President Obama to allow the Corps to release additional water from the Missouri River reservoirs to keep Mississippi levels up, but so far the White House has remained silent.
A $60-billion Senate-passed package of disaster aid to the victims of Superstorm Sandy, including $125 million in ag disaster assistance, died this week with the adjournment of the 112th Congress, but will move this month as a new bill in a new Congress. However, it won’t move as a single legislative package, but a series of installments related to disaster relief, House and Senate leaders agreed this week. House Speaker John Boehner (R-OH), fresh off his media pummeling over the fiscal cliff agreement, took more body blows from New York and New Jersey politicians when he announced the House would not take up the Senate bill prior to adjournment. Nearly $10 billion – an extension of federal borrowing authority for the National Flood Insurance Program requested by the Federal Emergency Management Agency – will be voted on January 4 in the House, with the Senate expected to clear the measure for President Obama’s signature shortly thereafter. The remaining $50 billion included in the old Senate bill will be voted on January 15, but the outlook for that package is uncertain.
Fiscal conservatives in both chambers argue the Senate bill includes too many programs and spends too much on issues not related to natural disasters, including money for salmon fisheries in Alaska and a series of what one Republican Senator called “gimmes” designed to get GOP votes. They argue the Senate should have produced a bill with a $25-30-billion price tag. The House may split the package yet again, voting on $18-25 billion for immediate recovery needs – expected to pass, including more dollars for FEMA’s emergency disaster relief fund – and then take up a $33-billion package of long-term “mitigation projects” so that areas can better withstand future storms. This latter package has a very iffy future.