The Congressional Budget Office recently released its latest update on the budget and economic situation last week which showed a grim picture for the economy if Congress allows it to go over the so-called "fiscal cliff."
The term fiscal cliff is often used to describe the mix of automatic tax increases and spending cuts expected at the end of this year. For agriculture this is important in terms of the nation's appetite for spending, interest rates and other key tax changes including estate and capital gains taxes.
The CBO report said the nation would be plunged into recession and unemployment would again grow to more than 9% if Congress allows the economy to go over the so-called fiscal cliff.
"This is another red-flag warning us of what we already know: Our nation's current economic path is unsustainable and time for action is growing short,” said Sen. Mike Johanns, R-Neb., “Congress must get serious about where we're heading and act in a bipartisan fashion before our economic train runs off the cliff.”
In remarks to the Western Dakota Estate Planning Council, Sen. Kent Conrad, D-N.D., the chairman of the Senate Budget Committee, said he continues to meet with a small group of Republican and Democratic senators who are working on a bipartisan and balanced long-term deficit reduction plan, while upwards of 40-plus Republican and Democratic Senators are supporting and encouraging their efforts. The group believes deficits need to be reduced by at least some $4 trillion over the next 10 years, and is using the much heralded Simpson-Bowles Fiscal Commission plan as its framework.
Conrad said a lot of important behind-the-scenes work is being done now. He expressed concern that if unchanged, the Fiscal Cliff could harm the near-term economy. He went on to say that the pressure to avoid the Fiscal Cliff could help prompt lawmakers to take on the politically difficult task of passing a comprehensive plan.
“As we look to avoid the Fiscal Cliff, it is my hope that we can replace the scheduled arbitrary, across-the-board sequester cuts and tax increases with even more savings from a balanced and comprehensive plan, like the Bowles-Simpson framework, that includes savings from entitlements, including health care, and tax reform that raises revenue,” said Conrad.
In talks last fall to avoid sequestration, the House and Senate agriculture committees were the most successful at proposing budget savings by sketching out a farm bill framework that provided $23 billion in cuts.
Even if the House never passes a farm bill, a similar type of proposal could again come up this fall after the election, said Pat Westhoff, director of the University of Missouri's Food & Agricultural Policy Research Institute.
If the election solidifies the status quo of a Democrat-controlled Senate and Democrat as President, there is a good chance that the farm bill could be included during lame-duck discussions of larger budgetary savings and extending certain tax benefits, he noted.
If Republicans take over both chambers of Congress and the presidency, those major items are less likely to get done during the lame-duck session and instead would be pushed to January, using short-term extensions to last from now until then, Westhoff said. In theory, this could mean that lawmakers may have to start from scratch on the farm bill, with a much bigger bull's-eye on spending.