There's a new Congress coming to town next year, but it looks a lot like the group that'll go back to work next week. What does that mean for agriculture? That's a tough question, but American Farm Bureau Federation President Bob Stallman talked about the key issues his organization sees as those lame duck lawmakers return to Washington, D.C., next week.
Stallman acknowledged that he's been asked what he thinks about the outcome of the elections and his response is that after spending promotion money and a month of intense campaigning one thing is true: "The more things change the more they stay the same." Essentially the House and Senate have the same political make-up - with the Democrats picking up two seats in the Senate and as many as six in the House. The party balance has note changed.
But in this lame duck session, Stallman notes there are some significant issues beyond the farm bill that are of concern. "In the fiscal cliff discussion there are three tax issues that will be discussed in that negotiation that really impacts the farm and the outcome of those discussions may be more important than getting a farm bill."
Here are those three key issues:
The Estate tax, which currently provide a $5 million exemption and a top tax rate of 35%, but it ends Jan. 1 and the exemption drops to $1 million with a top tax rate of 55%. "This will amount to the confiscating of a number of farms. It is projected that the new level of estate taxes, if put in place, would impact 10% of farms and ranches. It is pretty devastating," Stallman says.
Capital gains rates could go up. "Farming is a capital intensive business and if the rate goes up that could be detrimental agriculture," he notes.
Depreciation deductions go away. The Section 179 depreciation provision drops from $139,000 to $25,000 plus an adjustment for inflation in 2013. And the 50% bonus depreciation will also go away. "This accelerated depreciation provision has tempered the cost of upgrading in agriculture," he notes.
Add in that a newly created recession that could occur if Congress doesn't avoid that fiscal cliff, and he adds this is also not good for agriculture. "Prices farmers receive are influenced by the state of the economy and the demand for our products," he notes.
Moving on the farm bill
While the fiscal cliff is a hot-button issue, there's still a five-year farm bill out there awaiting passage. The Senate passed its version of the measure in June, and the House version has been languishing - after passage by the House Agriculture Committee - since August. Stallman notes that figuring out where Congress will go in the lame duck session would fill "binders with scenarios" his association wants to see a five-year bill reauthorized.
"We need to know the rules. We're making plans for the next crop year," he says. "Our preference is for a full five-year bill and a lot of the work has already been done."
In fact, he notes that the differences between the House and Senate versions of the bill - if the House version were to clear the full membership intact - - are small and could be worked out in conference committee. The key difference in the two measures is nutrition spending, the House wants a much bigger cut over the next 10 years than what the Senate has passed.
Another challenge, and one that many observers say won't be a problem is the looming rule that authorization of ag spending would revert to the permanent act of 1949. This will be a major change for the dairy industry, and takes effect Jan. 1; for other crops those rules would impact ag closer to harvest.
While Farm Bureau is against a one-year extension and is pushing for the full farm bill, Stallman acknowledge that very short-term extensions to essentially allow Congress to get a full bill would be acceptable. "Provided that those extensions push for a vote on the full bill early in the new Congress," he notes.
That looming dairy deadline is key because the 1949 permanent farm bill says that the price of milk paid to producers should be supported at a level between 75 and 90% of parity. If that were the case the payment to dairy producers could be pretty large (depending on how parity is measured). While this isn't a "gun" to the head of Congress, anything that would automatically increase spending on that level to one group is an issue.
Milk Income Loss Payments are already gone with no new farm bill, and the House version of the bill has a new dairy program that works to manage supply to bolster prices. Stallman says that program, which is not in the Senate version, isn't likely to cause a problem and could be worked out in committee.
Essentially, Farm Bureau and other ag groups will be bringing a lot of attention to the farm bill issue next week since the calendar is full and the fiscal cliff could take up a lot of time.
Stallman did express some concern if the farm bill were wrapped up into some "lame duck piece of legislation" as part of a budget deal for the fiscal cliff. In that case, he worries that farm bill spending could be trimmed further and that is a concern.
He emphasized that Congress has already done the heavy lifting to get close to a finished bill and that a conference committee could work out the big differences between the too.
Key trade issue
One area Stallman mentioned, that may not be on most groups' radars is passing permanent and normal trade relations with Russia. Now that Russia is a member of the World Trade Organization, they have to follow specific rules, but the U.S. also has to pass PNTR. "Compared to other priority levels it doesn't rank as high, but it is important," he says. "And hopefully his will be tee'd up next week in this lame duck."