Direct Payments Become Sequestration Sacrificial Lamb

DC Dialogue

Stabenow said sequestration agreement would free up committee to write farm bill without worrying about deficit targets.

Published on: February 15, 2013

If you don't like what's being served, maybe the better option is to offer your choice up on a silver platter.

For agriculture in the sequestration talks, Senate Agriculture Committee Chairwoman Debbie Stabenow thought instead of the 5% mandatory across-the-board cuts in non-discretionary spending set to go into effect March 1, agriculture would do its part by eliminating direct payments.

Stabenow was less than happy when backroom deals before the New Year left direct payments intact and no disaster funding for agriculture with the farm bill extension. This time around she took matters into her own hands and made sure that if money was going to be cut from ag, she wanted it her way and still get some extra funding for disaster funding while she was at it.

In a media call Thursday afternoon, she said it's "very clear" there was bipartisan support for reducing direct payments. Stabenow said the decision allows agriculture to do its part of deficit reduction, while avoiding the "irrational and irresponsible cuts" that come with across-the-board sequestration and supports all of agriculture, not just part of it.

And as her caveat, the bill also reinvests $3.5 billion to pay for a full farm bill extension, including the programs left stranded by the earlier partial farm bill extension plus disaster assistance for 2012 and 2013. The unfunded programs include renewable energy, rural small businesses, value-added agriculture, new and beginning farmers, conservation, specialty crops, organic farming, minority farmers, and local food producers.

Sequestration was designed to force Congress to get serious about its spending and also raising revenue. Senate Democrats released a plan Thursday that totally eliminates direct commodity production subsidies yielding $27.5 billion in "savings."

The plan would also raise an additional $55 billion by closing two tax dodges and placing a minimum tax on millionaires to counteract the effect of tax loopholes. The automatic budget cuts known as sequestration would be delayed until January 2014, in hopes that in the meantime a larger long-term deficit reduction deal could be reached by Congress and the White House.

It also requires a quarter of the savings to come from the defense budget, half of what would occur under the sequestration requirements.

She said the estimated savings from including the elimination of direct payments "frees up" the committee to write a farm bill without the fight over how much money can be saved. "That doesn't mean we won't debate other cuts or changes, but this satisfies the deficit reduction goal we've had as a committee."

But if her counterpart's response on the plan is any indication, this is anything but a sure thing.

House Agriculture Committee chairman Frank Lucas (R., Okla.) said in a statement that eliminating direct payments was to be part of a solution for the fiscal crisis as well as part of a comprehensive, balanced farm bill. "The Senate's approach of taking away our investment in rural America without addressing the hole it will create is not balanced and not acceptable," Lucas said.

As for those direct payments going away this year, Stabenow said it's most likely that USDA will honor its contracts with farmers on direct payments which begins Feb. 19. She said it is "probably more likely in 2014" than later this year for payments to be eliminated.

Stabenow said she expects the Senate to take up the bill once returning from its Presidents' Day recess before March 1.

The White House apparently has thrown its support behind the plan. We'll see if we can get some agreement, or if ag's sacrificial lamb will have to come another day.